Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Simonstown Agreement

Mr. Farr: asked the Secretary of State for Foreign and Commonwealth Affairs what representation he has made to the South African Government on the future role of the Simonstown Agreement.

Mr. Teddy Taylor: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Government policy on the Simonstown Agreement.

Mr. Wall: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the Anglo-South African Simonstown Agreement.

Mr. Carter: asked the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with the South African Government on the future of the Simonstown Agreement.

The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): The naval arrangements arising from the Simonstown Agreement are being reviewed and we shall report to the House in due course.

Mr. Farr: What consultations has the right hon. Gentleman had in this respect with Commonwealth leaders, and what views have been represented to Her Majesty's Government by Commonwealth leaders in the Far East?

Mr. Callaghan: It is not customary to disclose that kind of information, but, of course, it would be my desire that there should be consultations with all those primarily concerned. That is one reason why discussions will begin shortly.

Mr. Taylor: In these negotiations, will the Foreign Secretary bear in mind that the maintenance of good relations with South Africa could play a significant part in bringing about a settlement with Rhodesia, which is very important?

Mr. Callaghan: The attitude of South Africa towards Rhodesia has always been that it is not her problem and that she refuses to intervene in the affairs of other countries. For that reason, I am not sure that the hon. Gentleman's hypothesis is correct. Even if it were, our relations with South Africa could be very much improved by a change in her domestic policies.

Mr. Luard: Does my right hon. Friend agree that the situation is that, over the years, we have had an increasingly marginal military benefit from the agreement and that, against that, we have paid heavy political costs, especially in relation to the black countries of Africa? If it is true that the United States and other Western Governments are concerned that we should retain our military facilities at Simonstown, would not it be better for one of those Government to take over the military asset and political odium of retaining those facilities?

Mr. Callaghan: My hon. Friend sums up the position perfectly in the first part of his question. As regards the second part, I have no indication that the French Government or the United States Government have the slightest desire to take on this matter.

Mr. Wall: Is the right hon. Gentleman aware that the number of Soviet ship-days in the Indian Ocean has increased fourfold in the past three years? Will he confirm that one of the parties whom he will be consulting is the Supreme Allied Commander, Atlantic? Finally, will he say which African countries actually objected to the Simonstown Agreement?

Mr. Callaghan: I cannot confirm that we shall be consulting SACLANT. This is not within his sphere of responsibility.


We shall take account of all the necessary considerations, balancing—as I said at Cardiff on 25th October—the political disadvantages, which are great, against the military advantages, which are small.

Mr. Kinnock: Will my right hon. Friend accept from me, without complacency, that the Soviet Navy does not carpet the Indian Ocean from wall to wall and that there are many Commonwealth leaders who share his and my opinion that a significant breakthrough could be made in our relations with Rhodesia with South African assistance but that the only way to secure that assistance is by showing South Africa that we really mean business on racialism?

Mr. Callaghan: My hon. Friend referred to the Soviet Navy. There has been penetration by all navies over the past 12 months and, indeed, earlier. But some of the reports are seen to be grossly exaggerated when they are looked at in detail. As for South Africa's position in relation to Rhodesia, I repeat what I said before, which is that I believe that South Africa will judge her position in relation to Rhodesia in her own interests and will take what steps she considers necessary.

Mr. Rippon: Will the Foreign Secretary confirm that the Simonstown Agreement cannot be terminated unilaterally? Does he agree that it is of importance not just to us but to our allies, and does he agree, also, that a strong allied naval presence is essential both in the South Atlantic and in the Indian Ocean and that British naval forces should remain part of it?

Mr. Callaghan: According to the last clause, the agreement is terminable by mutual consent, but, as it involves a number of considerations which affect both countries, it is proper that there should be discussions between both countries. We shall continue to do that. As regards the presence of the Royal Navy or of any other navy in the South Atlantic, the right hon. and learned Gentleman might address that question to my right hon. Friend the Secretary of State for Defence, because it is clearly part of the defence review.

Mr. Frank Allaun: asked the Secretary of State for Foreign and Commonwealth Affairs why Her Majesty's Gov-

ernment's policy has changed regarding the withdrawal from all relationships resulting from the Simonstown Agreements and the termination of all military exchanges, visits and technical arrangements; and what discussions have been held within NATO for extending its activities south of the Tropic of Cancer.

Mr. James Callaghan: My hon. Friend knows that we are reviewing the naval arrangements arising from the Simonstown Agreement. Studies are made of the possible need to protect allied shipping lanes beyond the NATO area, but there has been no suggestion that the Alliance's treaty obligations should be extended beyond the Tropic of Cancer.

Mr. Allaun: Was there not a United Nations report earlier this year to the effect that Admiral Cousins had been instructed to study military collaboration between NATO and the South African Government, which is contrary to what the Foreign Secretary has just mentioned; namely, that NATO is limited to areas north of the Tropic of Cancer? Would not such involvement between Britain or NATO and the South African Government be deeply resented by the British Labour movement?

Mr. Callaghan: I am responsible for the whole of Government policy in this matter, to the Labour movement and beyond. I do not know Admiral Cousins, or of any studies that he has made. I repeat what I said in my original answer to my hon. Friend: studies have been made, but there is no commitment on the part of NATO members to engage collectively or individually in activities outside the NATO area.

Mr. Fell: Does the Foreign Secretary not yet realise that, in view of the imperative need for Britain to be able to export to every counry in the world, it is absolutely monstrous for him to indulge his liking for or dislike of the internal policy of other countries and to base his foreign policy on that? That is absolute nonsense, and he must know it.

Mr. Callaghan: If the hon. Gentleman continues in this way he will be rivalling the new Shadow Leader of the House. I suggest that he carries his studies a little further, and more broadly.

Mr. Fell: Why not join the Left?

Mr. Callaghan: The day that I do that they will welcome me as somebody returning to the fold. I do not think that is likely to happen for some time. I beg the hon. Gentleman to come up to date with some of his studies on the changing pattern of events in Africa. He may then find that the attitude that he used to adopt in 1945 is a little outdated.

Mr. Newens: May we take it from what my right hon. Friend said that the British Government will oppose any future proposal for the extension of the NATO sphere of influence to the South Atlantic? We know that studies have taken place and many hon. Members on the Government benches would feel happier if my right hon. Friend would repudiate any suggestion that we will support them in any way whatsoever.

Mr. Callaghan: There is no suggestion to this effect now. I do not propose to discuss hypothetical questions which have not arisen, and as far as I know there is no intention that they should arise.

Mr. Rippon: The Foreign Secretary is right in saying that NATO activities are limited to the North Atlantic. Will he now answer the question that I put to him earlier and confirm that in certain events our allies have a direct interest in the terms of the Simonstown Agreement?

Mr. Callaghan: I cannot confirm that, because I do not know the answer. Perhaps the right hon. and learned Gentleman will be good enough to put down a Question. I am not aware, from recollection, that the Simonstown Agreement covers allied navies, except in one particular—namely, where, by permission of both Governments, they are entitled to use certain facilities. I think that is the limit of the interest. I should prefer the right hon. and learned Gentleman to put down a detailed Question.

Mr. McCrindle: asked the Secretary of State for Foreign and Commonwealth Affairs if it is the Government's policy to maintain diplomatic and economic relations with South Africa and to adhere to the Simonstown Agreement.

Mr. James Callaghan: We shall continue to have businesslike dealings with South Africa. As to Simonstown, I would refer the hon. Member to the answer I

gave to his hon. Friend the Member for Harborough (Mr. Farr) earlier today.

Mr. McCrindle: I welcome that reply by the Foreign Secretary. Just as trade used to follow the flag, is it not at least quite likely that trade in future may follow a country's security? Will the right hon. Gentleman assure me that he will at least weigh that in the balance when considering the Simonstown Agreement? Whilst Simonstown exists, does he not think it a little petty to criticise British sailors visiting South Africa because they do not engage in social apartheid?

Mr. Callaghan: The last part of the hon. Gentleman's question has nothing to do with me. I have never made any comments on that kind of thing. Having once served on the lower deck, I regard it as too trivial to bother about. [Interruption.] I regard it as too trivial to bother about. I hope that the hon. Member for Yarmouth (Mr. Fell) is not getting deaf as well as lacking understanding. I regard these as minor issues. I have always been concerned with the broad question of what our policies should be regarding Simonstown and our relations with South Africa. What the hon. Gentleman has said in the first part of his supplementary question could be argued both ways. I am not sure that I would go all the way with him in what he has said.

Mr. Leslie Huckfield: Will my right hon. Friend accept that the Cape trading route is probably the furthest from any current Soviet naval base? Does he agree that as long as we maintain our base or some kind of connection there it is a big incentive for the Soviets to establish a base in the area as well?

Mr. Callaghan: We should try to avoid assuming that other nations necessarily react to what we do. Both South Africa, in relation to her attitude to Rhodesia, and the USSR, in relation to its presence in the Indian Ocean, will make their own decisions in their own interests. It is for us to consider that against our future defence policy.

Mr. Mather: If it is the right hon. Gentleman's policy to continue with the Beira patrol, how will it be serviced without the Simonstown base and how will the fleet auxiliary tankers operate without Simonstown?

Mr. Callaghan: That is a question for the Secretary of State for Defence, but I can promise the hon. Gentleman that it has not been ignored.

Cyprus (British Property)

Mr. Michael Marshall: asked the Secretary of State for Foreign and Commonwealth Affairs what representations he has made to the Turkish Government to obtain compensation for British citizens who suffered damage and loss to their properties through the Turkish invasion of Cyprus.

Mr. Bryant Godman Irvine: asked the Secretary of State for Foreign and Commonwealth Affairs what has been the result of the discussions between the Consul at Nicosia and the District Officer in Kyrenia about the safety of British property in Kyrenia.

Mr. Hurd: asked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking to ensure restitution of property and compensation for damage suffered by British residents living in that part of Cyprus now under Turkish occupation.

The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): We have made repeated representations to the Turkish authorities about the protection of British-owned property in Cyprus and have reserved the rights of United Kingdom citizens to claim compensation. Following my right hon. Friend's talks with Mr. Denktash, the Cypriot Vice-President, we hope that the situation will improve.

Mr. Marshall: I thank the Minister of State for that answer and, indeed, for the written information that he sent to me prior to tabling this Question. Is he aware of the size of the problem? It seems as though thousands of British residents, many of them retired, are facing actual or potential loss in Cyprus. Does he agree that the Turkish Government bear a special responsibility in this matter? Finally, will he seek to amend the Treaty of Guarantee so that the protection presently afforded to officially-owned British property is extended to privately-owned British property?

Mr. Hattersley: I accept that this is a problem of substantial proportions. Both

the Foreign Secretary and I insist that the Turkish authorities in Cyprus have a substantial obligation to protect these properties and we have been reminding them of that obligation for a very long time.
The future of the Treaty of Guarantee and of the island must await the general political outcome of the unhappy events there. It is not possible to stipulate any details of the new agreement until we have made a good deal more progress.

Mr. Irvine: As the Treaty of Guarantee deals with security, will the Minister of State tell the owners of property in Cyprus what he feels the treaty and the Government are ensuring?

Mr. Hattersley: I am anxious not to make any claims in this House, or publicly, that the Government cannot fulfil. As the hon. Member for Arundel (Mr. Marshall) rightly pointed out, this is a problem of substantial proportions. It is so great in numbers that it is not possible to obtain consular access or protection for every British property on the island. Much as we regret that state of affairs, that is the fact. We are determined to exercise what control and protection is possible, but I believe that it would be wrong of me to make claims which were not realisable.

Mr. Hurd: Does the hon. Gentleman accept that it is an urgent problem inasmuch as quite a large number of elderly people are living in distress and sometimes fear? Will he get from the Turkish authorities at least an undertaking that looting and trespass by their troops will be punished, that compensation will be paid for damage for which they are responsible, and that it is their general aim in the part of the island that they occupy to make a return to normal life as soon as possible?

Mr. Hattersley: We have urged all these propositions on the Turkish Government and on the leader of the Turkish community in Cyprus. I regret that the looting to which the hon. Gentleman referred is still taking place in the Kyrenia area. It would be wrong to pretend that that was no longer the case. I assure the hon. Gentleman that the Foreign Secretary and our many representatives abroad are doing their best to urge upon the Turkish Government the obligations that they ought to fulfil. I promise that we will continue to do so.

Rhodesia

Mr. R. C. Mitchell: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on relations between Great Britain and Rhodesia.

Mr. James Callaghan: I hope to do so on Friday next, when the House will have an opportunity to debate the continuation in force of Section 2 of the Southern Rhodesia Act 1965.

Mr. Mitchell: Will my right hon. Friend have talks with the new Frelimo Government of Mozambique to try to persuade them to obey the United Nations sanctions resolution?

Mr. Callaghan: Yes. Of course, the Portuguese are still the authority. We have had a number of discussions with the Portuguese Government and established contact with the new Frelimo Government. We shall certainly pursue that contact along the lines suggested by my hon. Friend. I recognise, as I always have, that some of these newly emerging countries have great difficulty with their economic life and relations with both Rhodesia and South Africa. Nevertheless, I have no doubt that the Frelimo Government will want to do all that they can.

Mr. Fell: May we have an absolute assurance from the Foreign Secretary that there was no special behind-the-scenes agreement to have the debate on Rhodesia on a Friday?

Mr. Callaghan: I have no idea.

Mr. Fell: Will he ask his right hon. Friend?

Mr. Callaghan: As far as I know, the sanctions have to be renewed by 12th November.

Mr. Fell: Why a Friday?

Mr. Callaghan: It is not for me to say why a Friday; it is for the Leader of the House. I hope that the hon. Gentleman will be in his place and will stay all day and take part in the debate if he is fortunate enough to catch Mr. Speaker's eye.

South Africa

Mr. Peter Morrison: asked the Secretary of State for Foreign and Common-

wealth Affairs if he will pay an official visit to South Africa.

Mr. Tebbit: asked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an official visit to South Africa.

Mr. James Callaghan: I have no plans to visit South Africa.

Mr. Morrison: Is the right hon. Gentleman aware that both President Kaunda and Mr. Vorster have made complimentary remarks about each other's speeches in the last three weeks? Does he agree that if the British Government were now to change their attitude towards South Africa it could well jeopardise the developing relationship between Zambia and South Africa?

Mr. Callaghan: I do not think that the hon. Gentleman can have heard my reply to the last question, but I would not base too much on the exchange of complimentary speeches, otherwise my right hon. Friend the Secretary of State for Employment would have marched through the same lobby as the Shadow Leader of the House last night.

Mr. Lee: Is not the fact that the present Government of South Africa were open and avowed admirers of Adolf Hitler another reason for Ministers in the present British Government not going there, since it might offend the susceptibilities of that Fascist Government?

Mr. Callaghan: If I thought that it would be of use, I would go anywhere, but I do not think that a visit at this stage would be of any value.

Mr. Tebbit: Will the right hon. Gentleman accept that we regret that he will not be going to South Africa in the near future because we see in him signs of learning from such visits—for example, his conversion to British membership of the EEC? If he were to undertake such a visit in the near future, he could visit other countries in Africa and come back and tell us whether he finds the South African régime any less liberal than that of Uganda or of any other tribal and military dictatorship in Africa. Why should he be so particular about picking on South Africa and not on them?

Mr. Callaghan: Certainly it is not for me to defend the régime in Uganda, and


I do not do so. But there is the particular problem of apartheid in South Africa, and I think that the hon. Gentleman recognises it. In conjunction with all the other members of the United Nations we have had to take steps to try to change the policy of apartheid which, in my view, is likely to lead to chaos and anarchy in the southern part of Africa and to an extension of Communism in that part of the world. Quite apart from the moral and human issues involved, it is our policy to continue to say to South Africa that if she wants good relations with us, as distinct from businesslike relations, we expect a change in this policy.

Mr. William Hamilton: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on future relations with South Africa.

Mr. Mather: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about British relations with South Africa.

Mr. James Callaghan: There is nothing I can add at present to what I said in the House of Commons on 30th October and in my speech at Cardiff on 25th October.

Mr. Hamilton: Does my right hon. Friend agree that, following the recent visit of British naval forces to South Africa, the South African Government made blatant political capital out of it and sought to get prestige and repectability on the international scene that they did not warrant? Will he assure us that, first of all, the Beira patrol will not be jeopardised as a consequence of the closure of Simonstown and, second, that whatever decision is taken by the Government there will be full acceptance of collective responsibility for that decision?

Mr. Callaghan: I can give the assurance about the Beira patrol because the ending of the Simonstown Agreement would not necessarily involve that at all, and the patrol would continue. On the second part of my hon. Friend's question, of course I give every assurance at all times, on all occasions, for all purposes.

Rear-Admiral Morgan-Giles: If the right hon. Gentleman really wishes to improve relations with South Africa, would it not be a good idea if he changed the answer that he gave a moment ago and planned to make a visit there, so that he could see for himself what the problems of that country really are? Would it not be a good idea if he took with him some of the 99 of his colleagues on the benches behind him who have signed a critical motion but of whom none, so far as I am aware, have been to that country since they became Members of Parliament?

Mr. Callaghan: I can only repeat what I said earlier: at present I do not think that a visit by me to South Africa would be helpful to anyone, so I must reserve the right to go there when I think that it will be most helpful to this country.

Mr. Luard: rose—

Mr. Faulds: On a point of order. The hon. and gallant Member for Winchester (Rear-Admiral Morgan-Giles) is quite wrong in his supposition.

Mr. Luard: Does my right hon. Friend agree that the South African Government has every reason to be extremely grateful to this country for her vote to keep South Africa in the United Nations—a vote to which I have no objection? May I express the hope that in undertaking to vote in that way on that issue, the Foreign Secretary may have secured some undertaking from the South African Government about her policies, in particular towards Rhodesia and Namibia, and, perhaps, her own racial policies?

Mr. Callaghan: I would not want to give my hon. Friend that impression. No undertakings were sought or received from South Africa. The decision on the vote was taken on entirely different principles. However, I certainly think that South Africa is aware, from the result of the vote, that considerable changes in her policies will be needed during the next 12 months if she is not to face an even more difficult situation when the United Nations meet next time.

Mr. Mather: In his consultation with foreign Governments over the ending of the Simonstown Agreement, has the right hon. Gentleman held discussions with the French Government to ascertain in what


way they intend to fill our place in South Africa, particularly in the realms of defence equipment and trade?

Mr. Callaghan: I am not aware of any proposal by the French Government to fill our place in South Africa and I have not had any consultations with them.

Mr. Leslie Huckfield: As one who has signed the motion to which the hon. and gallant Member for Winchester (Rear-Admiral Morgan-Giles) referred, and who has visited South Africa, may I ask my right hon. Friend, having met many of his staff in South Africa, what information they passed on to him about the likely propaganda use to which the South African Government would put a British naval visit?

Mr. Callaghan: With respect, I do not think that I should disclose any advice that I receive from officials. It is for me to take responsibility for the decisions that are made. But as we have now spent a long time on this problem, let me say to the House as a whole that I think that hon. Members will find that the benefits from the Simonstown Agreement, whatever they may be, and the consequences of giving it up, whatever may flow, will not loom very large against the defence review, as a whole, which is being conducted.

Sir D. Walker-Smith: I agree with the right hon. Gentleman in what he said earlier—that our relations with South Africa could be improved by an improvement in their domestic policies, which I hope can soon be brought about—but would he apply the same thinking elsewhere, for example, to our relations with the Soviet Union with reference to their treatment of ethnic minorities such as Jews and Ukrainians within their country? Should we not apply a uniform and comprehensive standard in these matters of human rights?

Mr. Callaghan: If the right hon. and learned Gentleman cares to put down a Question about that, I will answer it—[HON. MEMBERS: "No."]—even if his hon. Friends do not wish me to. But this afternoon I shall only repeat what he knows—that answers have been given on this matter more than once by me and my hon. Friends in the past, in which we have drawn the Soviet Government's attention from this Dispatch Box and in

other ways to the difficulties which are caused to an improvement in relations by some of their activities in this direction.

Namibia

Mr. Ioan L. Evans: asked the Secretary of State for Foreign and Commonwealth Affairs what is Her Majesty's Government's policy towards South African occupation of Namibia; and if he will make a statement.

Mr. Hooley: asked the Secretary of State for Foreign and Commonwealth Affairs if Her Majesty's Government are now prepared to accept the opinion of the International Court on the illegality of the occupation of Namibia by South Africa.

Mr. James Callaghan: I expect to be in a position to give a definite reply shortly.

Mr. Evans: I thank my right hon. Friend for that reply. I hope that regard will be paid to what we as a party have committed ourselves to, namely, that we accept the opinion of the International Court that the régime in Namibia is an illegal one. Does my right hon. Friend realise that the system of apartheid, which he has so recently condemned, is being extended in Namibia, that this is an international territory, and that we should recognise the rôle of the United Nations in it?

Mr. Callaghan: Without anticipating the statement which I hope to make later, may I say now that our aim is self-determination and independence for the people of Namibia? We are anxious to play our part in the international community in helping to bring that about. Apart from that, I note what my hon. Friend has said.

Mr. Hooley: Is my right hon. Friend aware that we hope that "shortly" means shortly, since the advisory opinion was handed down three years ago and has since been endorsed by the Security Council and the General Assembly, and that our equivocal position does no good to Britain's standing in Africa as a whole?

Mr. Callaghan: Perhaps it will help my hon. Friend if I say "quite shortly".

East-West Security and Co-operation

Mr. Gwilym Roberts: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on recent negotiations on East-West security and co-operation; and what further progress has been made in mutual arms reduction.

Mr. Hattersley: The CSCE discussions in Geneva have proceeded more slowly than we would have liked. But we continue to look forward to an early and successful conclusion to the conference.
It is bound to take time to reconcile the differences of approach between the two sides in Vienna. In the meantime, the discussions on force reductions are proceeding in a business-like fashion.

Mr. Roberts: Is not my hon. Friend very concerned about the extreme slowness of the discussions? In view of Britain's minimal contribution to Western defence, in spite of the enormous burden of defence costs on the British people, does he not feel that it is perhaps time to consider further extensive cuts in Britain's defence spending?

Mr. Hattersley: My hon. Friend's supplementary question confuses two issues. The first is the progress of the European security conference and the MBFR talks. The Government are anxious that progress should be made in that matter, but we are also anxious that the outcome should be satisfactory and successful. It may be that a successful outcome requires us to proceed slowly. Certainly all members of Her Majesty's Government agree that reductions need to be made in the burden of defence spending. Some of them will be in the defence review when it is announced to the House and to the country later this year. On the other hand, the MBFR and CSCE talks have to make progress on a complementary and parallel basis to that, and it would not be in the interests of détente or of this country if we were to try to proceed with those too quickly.

Mr. Sproat: What progress is being made in the most important section of the CSCE talks, namely, persuading the Soviet Union to allow greater and freer movement of people and ideas across frontiers?

Mr. Hattersley: Basket 3, which is the colloquial and ugly term for it, is the area of major controversy and difficulty. I take the view, as do the Government, that we have to make progress in that area for the conference to be successful. There is a need to make progress there, and I am anxious that we should succeed rather than move quickly. Those two matters must be reconciled.

Mrs. Winifred Ewing: Will the defence cuts involve a cut in nuclear expenditure? May we have a clear and straight answer to that?

Mr. Hattersley: I am sure that it will be clear when the defence review is announced later this year.

Cyprus (Mr. Clerides)

Mr. Rifkind: asked the Secretary of State for Foreign and Commonwealth Affairs whether he has any plans to meet President Clerides of Cyprus.

Mr. Hattersley: My right hon. Friend has no immediate plans to do so, although he remains in touch with Mr. Clerides and is ready, at all times, to meet him.

Mr. Rifkind: Does the hon. Gentleman agree that the continued occupation of the northern part of Cyprus by Turkish occupation forces is looking increasingly permanent? Is he aware of the recent announcement made by Turkish authorities that they will refuse to allow Greek refugees to return to their homes in the northern part of the island? Will he make the strongest possible representations to the Turkish Government, pointing out that Britain has no intention of forgetting her responsibility as guarantor of the integrity of Cyprus as a sovereign independent State?

Mr. Hattersley: We have said time and again, and I am happy to repeat, that we believe that the territorial integrity and peaceful existence of Cyprus must be preserved and reconstituted. It would not help towards that end if I were to comment or make a judgment on the likelihood of a permanent Turkish occupation. But it is equally certain that progress towards the end which the hon. Gentleman and I seek is most likely to come about in the short term if the leaders of the two communities in Cyprus continue their discussions and, when the


time seems ripe, a Geneva-like conference is again convened. Regrettably, that time has not yet arrived, but my right hon. Friend will be available to take part and play a major rôle in those discussions when the time seems appropriate.

Mr. Faulds: Does my hon. Friend not accept that many of us on the Government benches would not be very happy if part of the settlement of the Cyprus situation or part of the defence review were to include the abandonment of our base facilities simply for them to be taken over by the United States of America?

Mr. Hattersley: I certainly accept that, because my hon. Friend tells me that it is so. As for the details of the defence review, he must await the announcement by my right hon. Friend.

Democracy and the Rule of Law

Mr. Ian Lloyd: asked the Secretary of State for Foreign and Commonwealth Affairs if he will conduct a review of relations with all independent countries which in his opinion fail to observe the standards of democracy and the rule of law which he applied in deciding to hold a review of relations with South Africa.

Mr. Hattersley: No, Sir. Our relations with all countries are conducted, and reconsidered when necessary, in the light of British interests.

Mr. Lloyd: As the Foreign Secretary and others have made it clear today that the privilege of economic and social, let alone military, association with the United Kingdom is to depend upon very strict conformity with or observance of the United Nations Charter of Human Rights, will the hon. Gentleman make it clear on what grounds he discriminates between the alleged moral deficiencies of apartheid—[HON. MEMBERS: "Alleged?"] Yes, alleged—and the moral deficiencies of the other 70 so-called régimes in the United Nations, all of whom accept, perhaps in some cases only, patterns of political, legal and moral performance which are inferior to those of South Africa? We are entitled to know.

Mr. Hattersley: Her Majesty's Government are opposed to the violation of human rights wherever they occur. The Prime Minister made that clear in the

House on 13th June and the Foreign Secretary made it equally clear in the House on 27th March. Our policy on this matter and our attitude to it is not in question. Equally, we believe that all those régimes about which the hon. Gentleman speaks should be in the United Nations: we apply the policy of universality to them. However, on the hon. Gentleman's comments on apartheid in South Africa, if he does not understand the depth of detestation on this side of the House for all forms of racialism, and particularly the form practised in South Africa, he understands neither the Government nor the Labour Party.

Oman

Mr. Newens: asked the Secretary of State for Foreign and Commonwealth Affairs if Her Majesty's Government supports the efforts of the Sultan of Oman to suppress the rebellion in Dhofar; and if he will make a statement.

Mr. Hattersley: We continue to support the efforts of the Sultan of Oman against the Dhofar rebels, who constitute a threat to the security of both Oman and the Gulf.

Mr. Newens: Will my hon. Friend confirm that the revolt in Dhofar began against one of the most tyrannical and horrible despots in the post-war world? Will he confirm that British forces have been seconded there, that the British Government have acquiesced in the arrival of thousands of Iranian troops there, who have burned villages, destroyed wells, killed off many of the stock animals, and done tremendous damage? Is this not in danger of becoming Britain's Vietnam? Are our hands clean—

Mr. Speaker: Order. That is enough to be going on with.

Mr. Hattersley: There were certainly many features of the Government of Oman, to which my hon. Friend refers as being reprehensible, about which I share his views, but, with great respect, I believe that in some respects those views are overstated. There is another side to the question, which I hope that he will also accept. That is, first, that the revolt is, in part—and in large part —organised from outside that country. Therefore, Britain has obligations to a


country with which we have a treaty of defence and solidarity. Secondly, the participation of Iranian forces, while much overstated by my hon. Friend, is essentially a matter for them and not something which my hon. Friend ought legitimately to describe as being the subject of British acquiescence.

Mr. Wall: Will the Minister pay tribute to the Sultan's efforts in bringing democracy to his country, and to the Sultan's forces, including those British members seconded or on contract to those forces, for defeating a Communist-inspired invasion from South Yemen?

Mr. Hattersley: There is no doubt that there have been improvements in the way that the Sultan of Oman runs affairs in that country. Equally, I am sure that the hon. Gentleman, and certainly my hon. Friends, would agree that there has been room for that improvement, and the improvement was most welcome.

Oral Answers to Questions — EUROPEAN ECONOMIC COMMUNITY

Renegotiation

Mr. Blaker: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the progress of negotiations in the EEC.

Mr. George Gardiner: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement of the progress on the renegotiation of the terms of Great Britain's membership of the EEC.

Mr. Marten: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the Common Market renegotiations.

Mr. Stanley: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress with the renegotiation of terms of entry into the EEC.

Mr. Hattersley: I would refer the hon. Member to the report on the progress of renegotiation which my right hon. Friend made on 30th October in the course of his speech during the debate on the Address.

Mr. Blaker: Has the Minister's attention been drawn to recent statements by the Director-General of the FAO, by the group of international experts led by Lady Jackson, by Dr. Kissinger and by the Secretary-General of the United Nations, to the effect that the world faces a lasting world food shortage? Does that not make it clear that it is probable that a situation will continue in which we are able to obtain our food supplies more cheaply inside the EEC than outside it?

Mr. Hattersley: It would be unfortunate if the statements to which the hon. Gentleman refers were simply interpreted and analysed in terms of the cost of food in Britain when, very largely, they were concerned with the poverty of the Third World and the prospects of famine there. However, as for the facts, let me confirm that while a year ago it was assessed that membership of the EEC might produce an increase in the retail price index of between 1 per cent. and 1½ per cent., it is now the judgment of the statisticians that our access to the EEC will marginally keep down the price of food in Britain.

Mr. Spearing: Is my hon. Friend aware that this afternoon Tate and Lyle announced that there will be no sugar in this country after February, and that there will be a likely shortfall next year of 1·7 million tons? Therefore, does not my hon. Friend consider that there is a very strong case for inserting 1·7 million tons, or thereabouts, as a figure for renegotiation of the Commonwealth Sugar Agreement, so that we can now fulfil the arrangement thrown away by the right hon. and learned Member for Hexham (Mr. Rippon) in 1971?

Mr. Hattersley: I have been sceptical about the judgments of Tate and Lyle ever since 1950. I suspect that my hon. Friend shares that view. Concerning the figure for the Commonwealth Sugar Agreement, I confirmed to him in the House on Monday, and I hope to confirm to him in another place tomorrow evening, that the Government are deeply committed to the 1·4 million tons formula and will continue to press for that in the Council of Ministers.

Mr. Gardiner: Is it still the policy of Her Majesty's Government to make a


collective recommendation to the British people on the outcome of these negotiations?

Mr. Hattersley: I am sorry that the hon. Gentleman, who normally follows the Prime Minister's activities with such care, does not realise that the Prime Minister answered a question on this subject yesterday, to which I have nothing to add.

Mr. Roy Hughes: Does the Minister appreciate that there is great concern about his recent statement that there is not to be a decision on British membership until October next year? Does he not agree that there is need to speed up this matter and not slow it down, because already the British people have suffered enough from the disruption of their food supplies and there is now an urgent need to enter into long-term agreements with the Commonwealth and other suppliers and to safeguard the food of the British people.

Mr. Hattersley: With great respect, I do not believe that anyone who reads HANSARD rather than the Daily Mail believes that there is any doubt about the answer that I gave—particularly my hon. Friend the Member for Salford, East (Mr. Allaun), who is, I understand, happy about the answer which I gave about the timetable. At the time of the General Election the Government promised—a promise which we shall keep—that the British people will be enabled to make a judgment on membership of the EEC within a year from the election, which takes us until October 1975. If a judgment is possible before that time, the Government are anxious to bring that decision forward. That is the final day, and not the earliest day. It is as simple as that.

Mr. Marten: If the results of the renegotiations are put to a referendum of the people, will the Government study most carefully the excellent precedent for a referendum set by the previous Conservative administration over Northern Ireland, of which the then Prime Minister said quite clearly that the position in Northern Ireland would not be changed without the consent of the people? Will the Minister also bear in mind the very wise words of the previous Conservative Prime Minister, that it would be wrong

to belong to the Common Market without the full-hearted consent of the people? Does not "full-hearted consent" mean something more than "consent", and, therefore, may we assume that the Government would interpret that as at least a 66 per cent. vote in favour of membership?

Mr. Hattersley: I think that the Government are very anxious to fulfil the Leader of the Opposition's promise about full-hearted consent. We intend to do that on his behalf. Concerning the details of the referendum—if it is to be a referendum—there is nothing one can say which would give more detailed information until the final decisions on the form of consultation are taken. About that form my right hon. Friend said something in the debate on the Queen's Speech earlier this week, and I have nothing to add to that.

Mrs. Winifred Ewing: Will the Minister tell us anything at all about the renegotiation of the EEC common fisheries policy, particularly in so far as it relates to Scottish inshore fishermen, who will be sold down the European river on 1st January 1983 unless the Government can do something about it? Will he realise that the fishermen in my constituency and other constituencies are voting with their feet and leaving this industry, and that if many more do this whole communities will be at risk?

Mr. Hattersley: When last the hon. Lady asked me this question I reminded her that we had obtained a derogation from the common fisheries policy for the rest of this decade and into the 1980s. I am glad that she acknowledged that during her supplementary question. The future of the fishing industry in Scotland is determined jointly by our attitude towards the common fisheries arrangements in the EEC and the Law of the Sea Conference which was recently adjourned at Caracas. I give the hon. Lady the absolute assurance that the interests about which she speaks will be properly preserved by the Government negotiators in both those bodies.

Mrs. Ewing: The fishermen do not believe you.

Mrs. Renée Short: Is the Minister aware that the people should be fully informed of all the facts before the


referendum takes place? What steps do the Government intend to take to make sure that the Press and the media give all the facts? What resources will be available to organisations which want to spread this information?

Mr. Hattersley: My hon. Friend ought not to assume that automatically it is to be a referendum which will be used to judge the views of the British people. The Prime Minister has said that that is the most probable outcome, but no announcement has been made about the definite character of the referendum. Irrespective of the form in which the views of the British people are judged, I share my hon. Friend's view absolutely that it is important to have some form of Representation of the People Bill which ensures that both sides of the argument are represented.

Mr. John Davies: In making the reaffirmation that the Minister has about 1·4 million tons in respect of Commonwealth Sugar Agreement sugar, will he tell the House whether he thinks that the suppliers in the Commonwealth are as strongly committed as are Her Majesty's Government, and, indeed, hon. Members on the Opposition side of the House, to the supply of that figure?

Mr. Hattersley: I think that the suppliers in the Commonwealth are committed to access into the European market as long as they can be assured of an adequate price in the European market. What would be crazy for the Government to attempt to do would be to sign an agreement with the Commonwealth which required them to sell sugar into the EEC or into Britain at so low a price that it would be deeply to their disadvantage to do so. That is why I negotiated at all the Councils of Ministers in an attempt to obtain access for 1·4 million tons, but access at a reasonable price, which is a fair price to the Commonwealth and a price which encourages the Commonwealth to continue to supply sugar to us.

Mr. Dennis Skinner: asked the Secretary of State for Foreign and Commonwealth Affairs when he expects the EEC renegotiations to be concluded.

Mr. Churchill: asked the Secretary of State for Foreign and Commonwealth

Affairs if he will make a statement as to progress so far achieved towards the renegotiation of the terms of Great Britain's membership of the EEC.

Mr. Hattersley: As my right hon. Friend told the House on 30th October, it is our aim to conclude renegotiation by next spring.

Mr. Skinner: In view of what is happening around us, is it not high time that we as a Government, now that the rest of the Europeans—or some of them —are accepting the fact that we have good reasons for renegotiating, told them that the date is fixed as far as we are concerned, that that is the deadline, and that the objects must be achieved by that time?
Does my hon. Friend realise that we on the Government side have many things to do to get the matter put before the British people, to get our two-day Labour Party Conference organised so that it can draft the precise terms of the questions to be put before the British people, and to ensure that those powerful institutions that would like to take part in this campaign are excluded from taking part and using the money that they hope to use, which is what they did in the last election?

Mr. Hattersley: As to the implications of the final part of my hon. Friend's question, I share his view exactly that if a test is to be made of the British people's opinion it is important that it should be an honest test and that neither side should have undue advantage over the other. My hon. Friend and I do not disagree there.
As for the first part of my hon. Friend's question, he must understand that he, like my right hon. Friend the Foreign Secretary and myself, is committed to the policy of the Labour Party. The Labour Party's policy as enshrined in its manifesto is to seek to obtain better terms within the EEC. Our policy is, equally, to put those terms, once obtained or not obtained, to the British people. Our duty within that policy is to obtain the best terms we can, so that the British people can make a fair and objective judgment. That is not a proceeding that can necessarily be rushed. If we were to add an arbitrary date to the end of these processes we should be breaking faith


with the British people and with the Labour Party manifesto.

Mr. Churchill: It must be assumed that the Government are operating in good faith and renegotiating in good faith. Therefore, will the Minister give an undertaking that if the British Government's demands are met the Government will give their endorsement to the electorate?

Mr. Hattersley: I am grateful for the hon. Gentleman's assurance that he at least accepts our good faith. I shall take that in the spirit in which it was offered. This has been made absolutely clear by my right hon. Friends the Prime Minister and the Secretary of State for Foreign and Commonwealth Relations. We are negotiating in good faith. The implications of that are that if we obtain the terms for which we ask we expect that our view would be that British interests are best served by continued membership of the EEC.

Mr. William Hamilton: Will my hon. Friend confirm that it is the official policy of the Labour Party to stay in Europe—[HON. MEMBERS: "No."]—yes, indeed—if we get the conditions which we are now trying to negotiate? In that circumstance, the recent public opinion poll confirms the rectitude of that position.
Will my hon. Friend, to satisfy the curiosity of my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short), ensure that he publishes and that the Press gives full publicity to the fact that certain of our foods are cheaper within the EEC? Will he specify the foods which are cheaper now, as a consequence of our being in the Market, than they would be if we were out?

Mr. Hattersley: I cannot take any responsibility for what appears in the Press about the alternatives. I can promise my hon. Friend that when the time comes and the renegotiation at the ministerial level is concluded the case we present to the British people must not only explain the advantages and disadvantages of membership but must also explain the advantages and disadvantages of the alternatives. That is our clear duty to the British people and to the House.
As for the opinion polls, I confess pleasure about the one I read about in the Sun and the Financial Times yester-

day. However, all of us have grown slightly wary about assuming that opinion polls are right.

Mr. Wood: Does not the Minister of State agree that we have not only ourselves to consider in this matter, and that our whole relationship with what I will describe as the Protocol 22 countries must be affected by the continuing uncertainty of our own attitude? Therefore, the sooner the matter is decided the better, because either a referendum or a General Election would take some time to prepare.

Mr. Hattersley: I believe that the sooner this matter is concluded one way or the other the better. However, I hope that the Protocol 22 countries, acting as a united group, will decide where their best interests lie and will make progress towards securing those interests without waiting to discover the outcome of the renegotiations and of the test of the British people's opinion. The Protocol 22 countries should unite as a group and pursue their own interests with the maximum possible speed.

Hijacking, Terrorism and Kidnapping

Mr. Adley: asked the Secretary of State for Foreign and Commonwealth Affairs if he will raise at the Council of Ministers the need for a co-ordinated policy within EEC member countries to deal with hijacking, terrorism and kidnapping of people detained for the commission of crimes in furtherance of political objectives.

Mr. Hattersley: We are prepared to discuss in any international forum how to combat these crimes. We have recently taken an initiative with the aim of achieving a harmonised policy on aviation security in the wider forum of the European Civil Aviation Conference.

Mr. Adley: I thank the Minister for that reply. Does he not agree that international law and order is at stake if convicted hijackers and murderers can be sprung from prison, as we have seen so often in recent months? As this seems to happen far more in Western Europe than in Eastern Europe, does he not agree that there is a case, perhaps through the renegotiations, for the British Government taking an initiative with our


European partners and possibly considering the construction of a prison for these sorts of prisoners which is a very long, long way away from the BBC and ITV studios?

Mr. Hattersley: I am not sure about the hon. Gentleman's final proposal, neither am I sure that the EEC is the best and only forum in which this question should be discussed. Certainly some of our EEC partners have demonstrated the way in which these matters should be dealt with. The action of the Dutch Government in dealing with the situation firmly but calmly sets a pattern for the whole world.

Mr. Rippon: Will the Minister of State confirm that these discussions have taken place with Foreign Ministers in the EEC? They certainly took place under a Conservative Government. Can he assure us that those discussions are still continuing?

Mr. Hattersley: Yes, I give the right hon. and learned Gentleman that assurance gladly, but discussions on this topic have also taken place in seven or eight other fora, and it is a balance of judgment as to where is the most appropriate place.

Referendum

Miss Fookes: asked the Secretary of State for Foreign and Commonwealth Affairs if he will outline what part he intends to play in the preparations for the referendum on Great Britain's continued membership of the EEC.

Mr. Hattersley: My right hon. Friend will be participating in the Government's consideration of how we should implement our undertaking to consult the British people.

Miss Fookes: Will the Minister of State explain why the Government seem so reluctant and coy about giving any practical details as to how this consultation is to be brought about?

Mr. Hattersley: This is because the Government are reluctant to make statements which cannot be substantiated with fact and detail afterwards. The Government are determined to take a sensible and balanced view about how best the British people's will should be determined, and when what seems to be in the

interests of the British people has been decided the details of that consultation will be announced.

Mr. Whitehead: Does my hon. Friend accept that many of us on the Government side believe that when the referendum is held the responsibility for the questions which are to be put before the British people rests with the British Government who have conducted the negotiations, and with no other body?

Hattersley: I leave aside the assumption my hon. Friend makes, that it will be a referendum rather than any other form of consultation. Clearly, when the time comes the Government have obligations in these matters and the Government will not try to escape from those obligations. They have an obligation to negotiate what is best for the British people. They will have to make their view known on what is best for the British people.

Mr. Dykes: Will not the Minister of State develop this a little further and give the House the benefit of his views on the curious dichotomy and irony of a situation in which some members of his party who are not anxious to see us remain in the EEC are always rabbiting on about the sovereignty of this Parliament and yet are prepared to entertain the idea of a referendum, which would be a "phoney" form of consultation?

Mr. Hattersley: Even allowing for my own views on the subject—I fear that they have been made transparently clear during the last quarter of an hour—I do not see any automatic dichotomy beween preserving the proper rôle of this Parliament and consulting the British people on a matter of such constitutional importance. The British people are anxious that they should play a direct part in this decision and the Government are determined that they should do just that.

Hong Kong

Mr. Sillars: asked the Secretary of State for Foreign and Commonwealth Affairs if he will instruct the Hong Kong Government to introduce a wealth tax in the colony.

Mr. James Callaghan: No, Sir. Introduction of any new tax in Hong Kong would be a matter for the Hong Kong Government.

Mr. Sillars: Is my right hon. Friend aware that, given the make-up of the Hong Kong Government, there is no possibility of their ever adopting a Socialist measure such as the introduction of a wealth tax? Is it not a very serious anomaly for a Socialist Government in Britain to introduce a wealth tax here but to ignore the situation in Hong Kong, whose taxation system is much less progressive than ours and whose taxation system, like the make-up of their Government, is biased heavily in favour of the rich?

Mr. Callaghan: Yes, but taxation in Hong Kong is a matter for the Hong Kong Government and not for me.

Sir F. Bennett: While expressing gratitude to the right hon. Gentleman for that reply, may I ask him whether he will condemn this attempt by some of his colleagues to introduce an element of neo-colonialism into this House by which they are seeking to remove powers of self-government already granted to a dependency of this country?

Mr. Callaghan: My hon. Friend was quite right to introduce what he regards as the shortcomings of a Government for which we have final responsibility. I hope that the welfare provisions and other provisions of the Hong Kong Government will be improved.

Mr. Lee: While it is difficult for this country to give directives on the details of taxation to colonial Governments, is it not a fact that in the past Secretaries of State for the Colonies and previous title holders of my right hon. Friend's office have leaned heavily on colonial Governments in order to persuade them to adopt certain measures? Should not we do so in relation to this sort of thing?

Mr. Callaghan: I have been asked about a specific measure in this case, but that does not mean that I am wholly without communication with the Hong Kong Government on other issues.

Sir A. Royle: Is the right hon. Gentleman aware that his statement will be welcome in Hong Kong? He has dismissed the ideological fulminations of his hon. Friend. It is quite clear that if a wealth tax is introduced in Hong Kong the initiative of the Chinese will be undermined and there will be a resultant grave

lack of confidence and damage to all the population of Hong Kong.

Mr. Callaghan: That may or may not be right. I should think that there is a good case for increasing taxation in considerable measure in Hong Kong, but that is a matter for them. The fact that I am not able to issue a directive should not lead the hon. Gentleman to assume that there are not many aspects of the taxation system which could be improved.

NORTHERN IRELAND (MAZE PRISON)

The Secretary of State for Northern Ireland (Mr. Merlyn Rees): I will, with permission, make a statement on the escapes from the Maze Prison during last night.
Reports which I have received indicate that just after midnight last night, Army sentries in the perimeter watchtowers and prison staff on patrol observed that there were people moving outside the prison perimeter and raised the alarm. Sentries in a post overlooking the M1 motorway close to the prison saw a group of about 20 men approaching. A patrol fired two shots, having challenged the group. One of the group, subsequently identified as Hugh Gerard Coney, a Republican detainee, was found to be dead. The rest of the group surrendered and proved to be Republican detainees who had escaped from the Maze prison.
Subsequently, an attempted escape by Republican detainees from Compound 5 was reported. A hole in the ground was discovered outside the prison perimeter; it appeared to be the mouth of a tunnel and subsequent investigation revealed that the entrance to the tunnel was in a hut in Compound 5. Since the compound was one which had practically been destroyed in the recent burning of the Maze, the hinding of spoil was an easy matter, being scattered among assorted debris.
At 2.25 a.m. rioting broke out in the detainee part of the prison. A large number of Republican detainees attempted to storm the main gate in the administration area but, at the request of the Governor, troops drove them back using CS gas and baton rounds. After about 15 minutes, the detainees retreated to their compounds.
The security forces have recaptured 29 of the escaped detainees. A count of the detainees in the prison indicated that four are still at large. Present reports are that 30 detainees have been treated for injuries; of these, four have been sent to an outside hospital for x-ray. No prison staff have been reported as hurt.
The checking of identities within the prison is proceeding and a search being made for the missing men both inside and outside the prison. No visits or parcels are at present being allowed; they will be resumed as soon as possible.
The circumstances in which one of the escaping detainees lost his life are being investigated by the police; as soldiers were involved, the RUC are being assisted by the Army Special Investigation Branch. A report of this investigation will automatically be submitted to the Director of Public Prosecutions.
The House will not need reminding that the new disturbances follow upon the widespread destruction at the Maze Prison on 15th and 16th October, with which I dealt in my statement on 30th October. Urgent reconstruction work is being undertaken, but this adds to the security problems involved within the camp.
While there remains inevitably a considerable degree of discomfort, rapid progress is being made. All occupied compounds have been provided with Portakabins, gas heating and basic sanitation; the field kitchen has been extended and is serving three hot meals a day; and medical services are operating. I will keep the House informed of the progress of work at the Maze and will in due course make a statement on the prison building programme.

Mr. Ian Gilmour: The House will be glad to learn that this escape attempt was largely, though not completely, foiled, and will appreciate that the task of the security forces has been made much more difficult in this prison by its burning down three weeks ago. Hon. Members will wish to congratulate the security forces on the efficient way in which they dealt with the situation. We are glad to learn that no prison officer was injured.
The Secretary of State has said that a report of the investigation into the

shooting will automatically be submitted to the Director of Public Prosecutions. Will he confirm that this in no way implies that the soldier or soldiers concerned were in any way blameworthy?
As it is plain that terrorists are acting in this way in the hope of influencing the Government's future security policy, will the right hon. Gentleman assure that the House that incidents of this kind will have no effect at all on the way in which he looks at the security situation in future? Does he agree that at this particular moment it is very important for all men in public life in Northern Ireland to come to the aid of the security forces and not to criticise either them or the police?
While understanding the difficulties under which the Secretary of State is operating, and sympathising with him, and while in no way suggesting that this is the main cause, still less the sole cause, will he face the fact that the unrest in the prisons in Northern Ireland and elsewhere is made worse by the impression that the Government at present in Northern Ireland are merely drifting? Will he tell the House when he will be able to make an announcement about future policy and when this drifting will stop?

Mr. Rees: With regard to the soldiers and the Director of Public Prosecutions, this is automatic. It follows in every case and implies no judgment upon what happened last night.
It is important to support the security forces in Northern Ireland, given the deaths and the murders that take place in that Province, and, above all, the amount of arms that circulate in the Province and come from all parts of the world.
With regard to the political situation, it is clear; we have had our General Election, and at the appropriate moment there will be elections for a Northern Ireland Convention in the Province.
The point I make is that the violence is carried out usually by people who are not concerned with the political way forward, for if they were so concerned they have the chance in their own Province to see whether people will support them at the ballot box because of their views and not because of fear.

Mr. Fitt: As this escape attempt was restricted to detainees and not convicted prisoners, and as these men have been interned without charge or trial in Northern Ireland, is it not logical to expect that they will engage in every effort to obtain their freedom? Can the Secretary of State say why the findings of the inquiry will be sent to the Director of Public Prosecutions? Does he suspect that an offence has been committed? Can he say in what circumstances the Army is permitted to open fire? Were any of the escapers armed? Was any attempt made to take the life of any member of the security forces?
Finally, will the Secretary of State recognize—he must know this by now —that as long as Long Kesh internment camp remains, there will always be attempts to escape and there will be no peace and no hope of peace in Northern Ireland until internment without trial is ended?

Mr. Rees: With regard to the first point which the hon. Gentleman raises, these were detainees. The action which I described the other day was by properly sentenced prisoners, but this was by detainees.
Next, I must make abundantly clear that the Army is operating in Northern Ireland in support of the civil power, and, whatever happens, if a soldier does what was done here, whatever the provocation, the matter automatically goes before the Director of Public Prosecutions. Some people find that a curious way of proceeding, but we in this country say that the Army is operating in support of the civil power, and that happens automatically. I can tell the hon. Gentleman that this is not appreciated by many of the soldiers in Northern Ireland, who have told me what they have to put up with, with rocket attacks and so on, and then they have accept that a case of this kind will go to the Director of Public Prosecutions. But that is the law, and the fact of the case going to the Director has no bearing whatever on what happened last night.
The other point concerns the number of detainees and the fall of 100 in the last few months. It is not just a question of releasing people from a civil liberties standpoint. I have to take into account that there are other para-military forces in the Province which have indicated to

me, and indicated generally, that in the sort of situation there, they would act against the Provisional IRA. It is not a normal colonial-type situation. I repeat that this must be so, given all the facts behind the situation and given all the problems of civil liberty. The hon. Gentleman himself must know this, from the place where he lives and the protection which has to be given to him and to his home. I sympathise with him in that circumstance, as he well knows. But in the Province there is incipient civil war, and we all have to face that. It is not just a matter of one side.

Rev. Ian Paisley: Will the right hon. Gentleman take it from me that the vast majority of people in Northern Ireland will back the security forces and will back the Royal Ulster Constabulary, taking a view entirely different from that of the hon. Member for Belfast, West (Mr. Fitt)? Will the right hon. Gentleman ensure that the Army is encouraged to put down terrorism and that no deterrents are put on soldiers when they find themselves in a situation such as that which occurred at the Maze?
On another point, does the Secretary of State realise that there are appalling circumstances at present in the Maze prison? Is he aware that there are 200 Loyalist detainees, remand prisoners and sentenced prisoners without beds and without bedding, and that no pillows or sheets have been issued to the prisoners in the Maze at present? Is he aware also that there are beds available in the hospital which could be used by men who are now sleeping on the ground, even without groundsheets? Does he think that 100 men have adequate toilet provision when there is only one toilet to serve those 100 men?

Mr. Rees: The Government's instructions to the Army are quite clear, that it will deal with terrorism wherever it comes from. While the majority of it is carried out by the Provisional IRA, I could wish that what is carried out by the Protestant para-military forces also could be put down, because it is the fear generated by both which leads to many of the political difficulties which successive Governments in this country have had to face.
I put this also to the hon. Gentleman, since he will not mind plain speaking. When the Executive fell, that happened


not just because of the Ulster Workers' Council; it was the Ulster Workers' Council backed by Protestant Para-military forces. It happens on both sides, and that is what negates the political advance that we ought to take.
The hon. Gentleman asked me about the circumstances of Loyalist prisoners. All Loyalist prisoners have been issued with a palliasse, a blanket and a polythene groundsheet. As regards toilet facilities there are 13 toilets in each compound. As for electricity—I know that the hon. Gentleman is interested in this as well—all cabling and sub-stations were destroyed two or three weeks ago.
It is easy to comment from the outside. I assure the House that the prison authorities, backed by the Sappers, given what they had to face a fortnight ago, have done a remarkable job, and we shall do all we can to get back to normality. But only the other night a study hut in a Loyalist compound was burned down.
It is difficult in this sort of prison situation to get back to normality, given the nature of the prisons and the nature of the special category prisoners. It is not a normal prison. But the authorities there, on my behalf, have done an excellent job, in the face of what they had to contend with in the first instance.

Mr. Mahon: I appreciate the difficulties with which my right hon. Friend has to contend in Northern Ireland, and I support what he has said, with little exception, but is he aware of the recent statement of the Bishop of Down and Connor, Dr. Philbin, in which he said that if people need the protection of the security forces and of the Army, it is equally reasonable to suggest that those people-give co-operation to the forces in Northern Ireland? Will that sort of responsible statement be given more publicity not only in Northern Ireland and in Ireland generally but among the Irish in this country?
Finally, will my right hon. Friend take it from me, in support of what was said by my hon. Friend the Member for Belfast, West (Mr. Fitt), that there is great concern about internment without trial in Ireland, and will he note, in particular, that that opinion is more and more being held by moderate and reasonable people there?

Mr. Rees: My hon. Friend refers to the speech of Bishop Philbin, who is concerned about the problems of his community in Northern Ireland. No words of praise are too high for his general attitude and that of many of his co-religionists. Bishop Philbin is concerned about his community, and there is no doubt, whatever people's feelings in this House and in the country, that in the face of sectarian murders the community is infected with fear in a way which is difficult for us over here to comprehend. The success of the Royal Ulster Constabulary in dealing with sectarian murders is quite remarkable. Already a man has been arrested for being involved in the case of the two Catholic men who were shot at while going down the Falls Road the other morning. Given the situation there, it is remarkable that this is done.
Now, the question of detention. This is not the sort of detention or internment, whatever the word be, which we know of in some other circumstances. For example, I concerned myself a little time ago with the case of Nelson Mandela, who was detained in South Africa for his political views. Undoubtedly, that sort of detention would be wrong. But I am dealing with a situation in which people are involved in shooting and in killing, when the normal processes of the law cannot be followed. I have to tell my hon. Friend that if I were not to use what is available to me in advance of the Gardiner report, then there are other people in the community who would step in, and there would be a civil war situation in the communities akin to the Cyprus situation. Of that I am sure, and I have to take it into account.

Mr. Kilfedder: Ever since this prison was opened in my constituency, I have protested about its siting. We have heard a great deal about the inmates. I draw the attention of the House to the situation of those who live in proximity to the prison and who suffer a great deal. Does not the Secretary of State realise that, whenever trouble breaks out in the prison, the whole area is sealed off, and many people on the outskirts and in the estate immediately opposite the main gate are subjected to treatment which puts them on a par with the inmates of the prison? Will the Secretary of State realise that these local residents have a nightmarish time, and they might easily have been


used in the early hours of this morning as hostages by the escaping prisoners, or have been accidently shot in crossfire or harmed by the CS gas which we are told was used? May we have an assurance that the local people have not been hindered and have not suffered from CS gas?
May I put two other brief points? Will the Secretary of State say whether arms have ever been found inside the prison or on persons visiting the prison? Finally, is there no sophisticated equipment which will detect tunnelling? Surely, in this day and age it must be possible to find out whether people are tunnelling underneath the perimeter of the camp.

Mr. Rees: All I can tell the hon. Gentleman in terms of trying to find things out is that, of course, we did not last night, though it was not for want of trying. It is not as easy as all that.
I appreciate that the hon. Gentleman's constituents are living in a difficult place. They are bound to be sealed off on occasion, and there is no way out of it. My instructions to the Army this morning were to seal off the prison, and that was the essential thing to do. I am sorry for the lion. Gentleman's constituents, but that is a fact of life.

Mr. Carson: Is the Secretary of State aware that there is widespread support for the security forces in Northern Ireland as well as for himself as Secretary of State in spite of the vicious propaganda campaign of the SDLP throughout Northern Ireland that "Rees must go"? Is he aware that 200 beds have been offered by the Loyalist Prisoners' Association for the Loyalist prisoners in the Maze and that these have been refused by the Governor? Can he assure us that the hardships already imposed on Loyalist prisoners through the acts of the IRA will not be increased by the new measures in the Maze Prison resulting from the escape of the IRA last night? Will he also give an assurance that visits to Loyalist prisoners will be restored in full, since they were impaired by the acts of the IRA? Will he confirm that 11 remand prisoners were taken to the Maze Prison two days after the spate of rioting by the IRA?

Mr. Rees: I should be happy to meet the hon. Member for Belfast, North (Mr.

Carson) to discuss the last point of his supplementary question in detail. The Governor of the Maze Prison has my full support in dealing with the problems in the prison. He is aware of the problems there. The overall support he needs in the way of blankets and so on is provided by us from the outside. Visits will be restored as soon as it is physically possible so to do.

HOUSING FINANCE ACT (IMPLEMENTATION)

The Secretary of State for the Environment (Mr. Anthony Crosland): With permission, Mr. Speaker, I will now make a statement about the late implementation of the Housing Finance Act 1972. It is a little long. I am not usually guilty of this sin, and I apologise for it.
When my right hon. Friend the Prime Minister made his statement about Clay Cross on 4th April, he undertook that recommendations would be brought before the House when the Government had reviewed the full extent of the problem of late implementation of the Act by other authorities.
It is now clear that in many of these areas the councillors concerned will be able to establish that there were reasonable grounds for the delay. But there are perhaps a score or more of authorities where, in the process of audit, the district auditors way well conclude that the councillors concerned should be surcharged. I stress that decisions to surcharge would fall to be made only after the full processes of the law had been observed.
But on the scale which now seems likely, were surcharges to be made a large number of councillors—probably some hundreds—who were holding office at the relevant times would be disqualified. The sums involved are in most cases likely to be considerable—indeed the total may be between £1 million and £2 million—and it would be far beyond the means of the individuals concerned to meet them.
This situation is, as far as I know, unprecedented though not, alas, unforeseen. I made my position clear during the Committee stage of the Bill. I said that as a democratic socialist, profoundly


committed to the rule of law, I could not condone, let alone encourage, defiance of the law; and I told the special Labour Party conference in July 1972 that I could not support non-implementation.
But I also said that democracy is a two-way bargain between government and governed, and that the Housing Finance Act infringed the tacit agreement as to what is permissible and what is not. By excluding a large group of our citizens from democratic protection, it offended a basic sense of natural justice. I added that while I would in no way encourage a confrontation between democratic central and democratic local government, if one should come I would hold the Conservative Government mainly responsible.
The confrontation did occur, and we now face the question of how to deal with the late implementers.
There are three possibilities. First, the putative surcharges—that is, the amount of rent income lost by late implementation —could become a charge on the central revenue and be met by the national taxpayer. I am adamantly opposed to this. If people deliberately disregard the law, they must not be baled out by the national Exchequer.
Secondly, we could allow the district audit process to proceed unchecked, with the full panoply of formal hearings, possible High Court actions, attachment of earnings, seizure of goods by bailiffs, and ultimate bankruptcy being brought to bear on large numbers of councillors up and down the country. This seems to me a foolish course of action. It would resurrect in an intensified form the bitterness and anger of those earlier days of social confrontation from which we surely want to move away.
Moreover, only a minuscule fraction of the lost rent income would in practice be recovered. The bad debts would eventually fall to be met by the community. We should have a lot of bankrupt councillors, but negligible recoveries. And this harsh approach would not in my view be morally justified, because we have to recall the circumstances under which late implementation occurred.
The rent provisions of the Act did not come into force until well into August 1972. But they required local authorities to operate new rent schemes from

1st October 1972. During this period—this outrageously short period—local authorities were required to adjust themselves to the loss of their traditional freedom to fix rents for their own dwellings and to the task of implementing complicated provisions which were widely held to be repugnant.
It is not surprising that many authorities encountered difficulties—not only of administration but also genuine misunderstanding of the law. Many councillors thought they would be acting legally if they did nothing and waited for the Government to activate the provisions for the appointment of housing commissioners. Some authorities indeed invited this intervention. I therefore concur with the New Law Journal, which wrote editorially on 18th July that
there does seem a case for not instigating Draconian measures against these other local council members … Justice ought always to be tempered with mercy and there are times when the exercise of compassionate judgement may have more long-term effect for good than a strict adherence to the absolute letter of the statutory provision.
We do not want to hound some hundreds of councillors into bankruptcy. Yet disregard of the law must not be allowed to place a charge on the taxpayer. So I propose the following. The lost rent income will be recovered by the local authorities concerned, and not by the process of surcharge. Local authorities will be empowered to make good the losses over a period of years out of future rents; alternatively they may decide that the losses shall be borne in whole or in part on the rates. [Interruption.] Such rate payments would be excluded from Government rate support grant. Where late implementing authorities have, as a result of local government reorganisation, been absorbed into new and larger authorities, it will be for the new authorities to decide whether to recover the losses by means of differential rents or a differential rate levy applying solely to the areas of the former authorities.
I emphasise that the point of a surcharge under the law is to recover moneys; it is not a penalty or a fine. What is now required is to give the local authorities concerned a second chance to collect the money which they should have collected in the first place.
The Clay Cross Council never implemented the Act at all; and a surcharge of some £7,000 has already been imposed on the former councillors and upheld by the High Court. The Government do not intend to rescind this surcharge retrospectively, nor to use public funds to discharge the financial liabilities incurred by those councillors. Any funds for this purpose must come from private subscriptions, organised by those associated with the decisions taken at the relevant party conferences.
I understand that a fund for this purpose is likely to be set up. In view of this, as my right hon. Friend the Prime Minister has already foreshadowed in the House, we shall end the disqualification already incurred by any councillors as a direct result of the aftermath of the Housing Finance Act. The loss of rent income in Clay Cross beyond the £7,000 already surcharged will fall to be recovered from local rentpayers or ratepayers at the discretion of the new district council.
These proposals, which will be embodied in early legislation, accord with the crucially important need to maintain the observance of the law—[HON. MEMBERS: "Oh."]—even a law as offensive and provocative as the Housing Finance Act. They ensure that no burden is borne by the taxpayer as a result of non-implementation of the law. They provide for the responsibility to rest with the local councils concerned. The communities affected must themselves find the lost income; and how they do it is a matter for local democratic decision.
I believe that these proposals are fair, humane and realistic, and will bring to a close an unhappy chapter in our social history.

Mr. Rossi: This is a sorry day for the constitution of this country, for the rule of law and, indeed for the Labour Party itself. The right hon. Gentleman has distinguished between Clay Cross and the other authorities, and I would like to comment upon or ask questions upon these matters separately.
We welcome that public funds will not be made available to relieve the Clay Cross councillors of the consequences of their defiance of the law of this country.
With regard to disqualification, I ask the right hon. Gentleman whether this means an act of indemnity, and, if so, where that places the advice that he has received, because an act of indemnity contravenes constitutional practices, sets a dangerous precedent and acts as an incitement to others in the future to disobey the law.
I turn now to the matter of lost rent income, which I understand to be about £120,000—not simply the £7,000 surcharge—to which must be added the loan charges incurred in borrowings by the local authority to make good that loss, as well as the additional administrative costs incurred.
If this cost is to fall upon tenants they must now feel that they have been grievously deceived by those councillors who led them along this road; but how much worse is it for the ratepayers of the area concerned who may have to bear the burden, let alone the ratepayers who elected those councillors? All ratepayers of the new district may be saddled with this outrageous burden which need not have been incurred if the law had been obeyed.
With regard to other councillors concerned, the right hon. Gentleman mentioned in his statement that there were cases in which authorities encountered difficulties of administration and genuine misunderstanding of the law. Where that has happened relief should be given. But we must distinguish between those cases and the remaining cases where authorities embarked upon deliberate disobedience and flouting of the law which had been passed democratically by this Parliament. Are they to be distinguished from the Clay Cross councillors, and what will the Clay Cross councillors themselves think of that situation? Are they to be the scapegoats of the indecision of the Labour Party?
The right hon. Gentleman and his colleagues bear grave responsibility in this matter—[HON. MEMBERS: "Ask questions."]—because many of them incited councillors up and down the country. My question is: will those right hon. and hon. Gentlemen who incited those councillors now dip into their own pockets and make good the deficits?

Mr. Crosland: What the Clay Cross councillors think about this we shall no doubt hear in the course of the next few minutes.
With regard to the distinction between cases of deliberate disregard for the law and cases where no misconduct or negligence was involved, that distinction was made automatically by the district auditors in the course of investigations.
With regard to the hon. Gentleman's other points, this is a sorry day—which, alas, has its origin in the day when the Housing Finance Act was first introduced. I have never known an Act of Parliament which so outraged the feelings of large numbers of moderate councillors up and down the country.
The hon. Gentleman is, with respect, confused on the subject of the act of indemnity. The advice, to which he referred, relating to this subject was not advice on the subject of disqualification but advice on financial penalties and a surcharge, and the advice concerned a possible act of indemnity to indemnify councillors already surcharged. But I am proposing no such thing, and the £7,000 surcharge stands.
The question of ratepayers and rent-payers can be argued either way, and should be decided locally, but the crux is that lost money should be found from the locality which gained from failure to implement the Act in time. Whether it should be found from the rentpayers who precisely gained or from the ratepayers, the ones who elected the councillors who were late in implementing the Act, is a matter for local decision.

Mr. Swain: Is my right hon. Friend aware that this is the squarest curate's egg he has ever announced in the House? As the Member for Derbyshire, North-East, I would prefer to hear the statement in the House instead of reading it in the columns of the Star in Sheffield.
Is my right hon. Friend aware that the Clay Cross councillors who broke or defied the Housing Finance Act were proceeded against under the Local Government Act 1933 in a way which was proved beyond doubt to be punitive? They were proceeded against, on behalf of the Minister involved, after six short weeks under Section 237 of the Act that I have just mentioned.
Is my right hon. Friend aware that the part of the statement removing the disqualification will be welcomed, but that the other part of his statement is so full of complications that it needs further explanation as far as we are concerned and, indeed, as far as the councillors are concerned? Obviously there must be a distinction in the statement between the Clay Cross councillors and the other councillors involved.
Would my right hon. Friend accept a suggestion from me that he should at an early date meet a deputation to discuss the complications that he has himself made in his statement and to enable us to have a clear understanding of what it means before legislation is introduced?

Mr. Crosland: It is true that punitive action was taken against the Clay Cross councillors because they knowingly disregarded the law. Whether the action taken was wise is a different matter, and here I have some sympathy with my hon. Friend, because not only I and other right hon. and hon. Members on this side but indeed The Times, in a leading article in October, strongly criticised the allowing of lost rent income to build up instead of the housing commissioner being sent in.
I would like to consider my hon. Friend's suggestion about a deputation, and I would be happy to talk to him, but without, of course, making any commitment.

Mr. David Steel: Will the right hon. Gentleman accept that whenever people break the law in pursuit of a cause in which they passionately believe, knowing full well the penalties they will incur, they receive some respect from the public at large, even from those people who disagree with them, but where they break the law in the belief that their friends in high places will come along subsequently and legalise what they have done they are merely cardboard martyrs who deserve nothing but contempt? Does he recognise that, whatever common sense there may be in some of the financial proposals he announced today, his setting aside of the disqualification will encourage the growth in lawlessness in our society that we see today?

Mr. Crosland: No, Sir, I do not think that. It should be made clear that there is no question of retrospective removal of


the disqualification. What I am suggesting is that we should shorten the period of the disqualification. By the time of Royal Assent the councillors concerned will probably have been disqualified for a year and a half.
On the more general point, I do not think that my decision is likely to encourage lawlessness. Any Minister in my position must try to find a balance—it is very hard to do so—between two conflicting aims. One is to try to close an extremely unhappy chapter in our social history—in the words of the New Law Journal, to temper justice with mercy. The other aim is to do so in such a way as gives maximum defence to the principle of observance of the law, by saying that we shall not find public funds to cover the £7,000 surcharge, to say that not a penny of the likely loss of rent income will fall on the taxpayer, that it must all fall on the areas where the late implementation occurred. We have come as close as we can to finding a balance between two crucial objectives.

Mr. Skinner: Does my right hon. Friend agree with me that so discredited and so outrageous was the Act that even the Tory Opposition in the latest election campaign decided not to include it in their manifesto, just as they did not include the Industrial Relations Act?
Has my right hon. Friend looked at the auditor's report on Clay Cross? Has he noticed the other side of the equation? There was a loss in rent revenue of £7,985. The auditor declared both verbally and in writing that the councillors had failed to disburse £10,000 in rent rebates, thereby saving the taxpayer and the ratepayer combined £10,000 in that period, a saving of £2,015. How can the £7,000 be collected, when they have been saving the ratepayer and the taxpayer money?
My right hon. Friend is prepared to remove the disqualification. Is he not prepared to follow the logic of that argument and remove the phoney surcharge as well? Is it not sad that within the Labour establishment we now say that those who fight valiantly and give in will be excused but that to some degree those who fight valiantly to the bitter end will be ostracised?

Mr. Crosland: My reading of the Tory manifesto was not so detailed as to enable me to answer my hon. Friend's first question. This is not the moment to go into the financial affairs of Clay Cross, but I am bound to accept the finding of the district auditor, as confirmed by a court order. That is the figure that has statutory reality for me. My hon. Friend also asked why I did not pursue the proposals to what he considers to be the logical conclusion of also removing the surcharge. I am not prepared to do that. I think it reasonable to say that, as part of a general attempt to bring this chapter to an end, the disqualification should be lifted after a year and a half. I do not think that it is right—and this has been repeated in every statement on the matter by my right hon. Friend the Prime Minister and other leaders of this party—that the £7,000 should be recovered out of public funds. We have never said that it would be.

Mr. Graham Page: Is the Minister really saying that, in President Ford-like fashion, he can pardon the Nixon-Clay Cross councillors without any legislation passing through the House? Does he not think that unless a person is prepared to observe the rule of law he is not fit to be a councillor?

Mr. Crosland: The right hon. Gentleman clearly did not hear my statement. Incidentally, I should like to tell the right hon. Gentleman that it is much better at least to announce definite recommendations than to pursue these matters through the sly and devious route of using the Official Solicitor. I made it clear in my statement that legislation will shortly be introduced into the House.

Mr. Faulds: Will my right hon. Friend ensure that the first contribution to the voluntary payment of the Clay Cross surcharge—and a sizeable one—is made by his right hon. Friend the Leader of the House, whereupon the rest of us will grudgingly cough up?

Mr. Maude: Is the right hon. Gentleman aware that his attempt to justify authorising Labour councillors to pass the burden on to ratepayers, on the ground that, as he said in a supplementary answer, they elected the councillors, is totally disingenuous? As there is universal


adult suffrage in local government elections, the rent payers and all other citizens who voted are equally liable with the ratepayers, and it is wrong that people who may have been in a minority should be saddled with this burden. Is not the right hon. Gentleman saying, despite all his protestations that he wishes to uphold the law, that Acts of Parliament shall be obeyed only if the Minister makes an ex cathedra pronouncement that they are just?

Mr. Crosland: It is extraordinary that the myth still appears to persist on the Conservative benches that council tenants do not pay rates. They pay rates like anyone else. I have not said that the money shall be found out of rates or rents. I have not made the choice myself. I have simply established the principle that it will not be found by the national taxpayer; it will be found from the communities that benefited by late implementation. I regard it as a reasonable matter for local decision whether the money should come out of rents or rates.

Mr. Edwin Wainwright: Will my right hon. Friend take into account that the Act was one of the most vicious ever? It was passed against the will of the people. It was pushed through the House in the face of tremendous opposition. The Tory Government knew full well what they were doing to the councils. Will my right hon. Friend also bear in mind that when there were a few councils left in the bitter fight they were somehow or other singled out so that Clay Cross would be on its own and could be defeated without the support of the others? When councillors met officials in London, a promise must have been made to them that if they gave up the fight they would be forgiven for their action. Will my right hon. Friend look into that? If the new councils say that they will not put into effect my right hon. Friend's suggestion, what will happen to the councillors concerned?

Mr. Crosland: I well recall how the Housing Finance Bill was pushed through the House. I was in charge of the Bill in Committee for the Opposition. I well recall that it had the longest Committee stage that any Bill has had since before the First World War. My hon. Friend has in his constituency one of the former councils that were involved. It was one

of the five councils in England—there was another one in Wales—which actively invited in the housing commissioner and were refused by the then Government.
If the new councils were to refuse to implement the Act—I very much hope that this will not occur—the district auditor process would have to start again.

Mr. Amery: I do not wish to re-open the debate which the right hon. Gentleman and I waged for so long in Committee. I do not wish to embarrass him in any way. I congratulate him on having the courage to stand firm on the Clay Cross surcharge, but I feel some doubt about the appropriateness and the propriety of passing the burden from the councillors to the ratepayers or rentpayers. For the other councils concerned, does the right hon. Gentleman accept that this will at least be a good lesson to the local electorate that local electors get the local governments that they deserve?
On disqualification, I submit that the right hon. Gentleman is setting a dangerous precedent for any controversial legislation which may arise from one side or the other. Finally, I ask the right hon. Gentleman to put on record that the work of Mr. Skillington at Clay Cross was discharged in difficult circumstances with the greatest efficiency and humanity.

Mr. Crosland: The right hon. Gentleman speaks with his usual moderation. During our previous discussions the only reservation that he had about the Bill, which he so skilfully conducted through Committee was whether the housing commissioner should be sent in in the event of non-implementation of rents and rates. If the lost rent income is not found from one or other of the local sources there are only two other alternatives. One alternative is that it will be found by the taxpayer. That I would regard as intolerable. The second alternative is that the loss will not be found at all, in which event the bad debt will fall on public funds. By that method we would not avoid public funds paying for the loss in the end.
On disqualification, I do not think that we shall be setting a dangerous precedent. Like a lot of hon. Members, I have pondered very hard all the way through this matter. I think that it is right to shorten the period. Even prison sentences are sometimes shortened. It is


not a unique notion that a sentence is shortened after it has been imposed. I am as anxious as the right hon. Gentleman that this decision should not act as a precedent for non-implementation of the law.

Mr. Speaker: We cannot debate this matter further. We have had an indication of legislation. We must now move on.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 22ND NOVEMBER

Members successful in the Ballot were:

Mr. Tim Renton. 
Mr. Keith Speed. 
Mr. Guy Barnett.

BILLS PRESENTED

EDUCATION

Mr. Secretary Prentice, supported by Mr. Secretary Ross, Mr. Secretary Morris, Mr. Joel Barnett, and Mr. Ernest Armstrong, presented a Bill to make further provision with respect to awards and grants by local education authorities; to enable the Secretary of State to bestow awards on students in respect of their attendance at adult education colleges; and to increase the proportion of the expenditure incurred in the maintenance

or provision of aided and special agreement schools that can be met by contributions or grants from the Secretary of State. And the same was read the First time; and ordered to be read a second time tomorrow and to be printed. [Bill 6.]

HOUSING RENTS AND SUBSIDIES

Mr. Secretary Crosland, supported by Mr. Edward Short, Mr. Secretary Jenkins, Mrs. Secretary Williams, Mrs. Secretary Castle, Mr. Secretary John Morris, Mr. Joel Barnett, Mr. Reginald Freeson, Mr. Attorney General, and Mr. Gerald Kaufman, presented a Bill to repeal certain provisions of the Housing Finance Act 1972; to make further provision as to rents; to introduce new housing subsidies for local authorities and new town corporations and abolish certain existing subsidies; to make minor amendments of certain enactments relating to housing; and for connected purposes. And the same was read the first time; and ordered to be read a Second time tomorrow and to be printed.[Bill 7.]

BUSINESS OF THE HOUSE

Ordered,
That if the Pensioners' Payments Bill be committed to a Committee of the whole House, further proceedings on the Bill shall stand postponed and that as soon as the proceedings on any Resolution come to by the House on Pensioners' Payments (Money) have been concluded, this House will immediately resolve itself into a Committee on the Bill.—[The Prime Minister.]

Orders of the Day — PENSIONERS' PAYMENTS BILL

Order for Second Reading read.

4.25 p.m.

The Secretary of State for Social Services (Mrs. Barbara Castle): I beg to move, That the Bill be now read a Second time.
In doing so I believe that I shall succeed in restoring harmony to the House. This is a short Bill but an extremely important one in humanitarian terms to many of our citizens to whom the £10 bonus, which the Bill enables us to pay this Christmas, will come as such a pleasure and such a relief.
The purpose of the Bill is to pay the bonus to more than 9 million people. I am sure that it will receive the general support of the House. I am grateful to the House for affording it a swift passage, which will enable the payments generally to be made before Christmas.
The beauty of the Bill lies in its brevity. Gone is the requirement, as distinct from earlier Bills, that the recipients of qualifying benefits must have reached pensionable age. Over and above the 8 million pensioners who have retired, the Bill adds another 1 million beneficiaries. They will now qualify for the bonus even though they are under retirement age. The scope of the Bill includes widows, invalidity pensioners, those on an attendance allowance and those recipients of industrial injury benefit or war pensions who are permanently unfit to work. I want to make it clear that that is what is meant by the unemployability supplement, which is a qualifying benefit for the bonus. It is not the same as unemployment benefit. There has been considerable misunderstanding on that point. I wish to make it clear that those on unemployment benefit will not qualify. Only those receiving industrial injury benefits and war pensions who are permanently unfit to work and those in the other categories to which I have referred will qualify.
The Bill provides for an additional million beneficiaries. It discharges the commitment that we made in our manifesto. This is just one more example of

the Government hurrying to carry out a commitment which was made during the election campaign. The Bill is in accordance with the arguments which we advanced when in Opposition when the Christmas bonus Bill was first introduced. I have no doubt that Opposition hon. Members will accept those arguments on this occasion.
The great bulk of payments to persons over pension age who are qualified will again be dealt with by the post offices. I must express my gratitude to the post office staff and to sub-postmasters who are prepared to perform this task when their period of greatest work pressure is approaching. I am sure that the House will wish to join me in that tribute. I include in this expression of gratitude the staff of my own Department who will arrange for speedy payment to most of the new categories of beneficiaries. The majority of those entitled will receive the £10 payment during the week beginning 18th November. All but a handful of payments should be made by Christmas.
It may help the House if I briefly describe the details of the Bill. These details will also apply in Northern Ireland. Clause 1 deals with conditions for the receipt of the bonus payment. A person must be present or ordinarily resident in the United Kingdom or any member State of the EEC at some time during the week beginning 18th November, and be entitled or treated as entitled in respect of at least one day of that week to payment of a qualifying benefit. There is provision for a further payment of £10 in respect of a spouse when both the beneficiary and his spouse are over pensionable age. For most married couples over pensionable age the wife will be entitled to a separate payment on her own book. Only one bonus will be payable in respect of any one person.

Rev. Ian Paisley: As this Bill applies to Northern Ireland, naturally those of us from Northern Ireland are interested in it and welcome it. Can the right hon. Lady assure us that all post offices in Northern Ireland will be able to pay out the bonus, since we have discovered that in the case of some of the social service payments some post offices are not able to pay out the benefits?

Mrs. Castle: I have no information to the contrary but I will look into the point


raised by the hon. Gentleman. If we get information before the debate ends, I will convey it to him, but it is a point new to me.
The bonus will be tax-free and will not in any way affect entitlement to other benefits, such as supplementary benefit, rate rebates or rent allowances, and will be disregarded in calculating charges for Part III accommodation. Qualified people in such accommodation, or in hospital, will get the bonus in full.
Clause 2 lays down that the week in which the conditions must be satisfied is the week beginning 18th November. It also sets out the qualifying benefits. These are retirement pension—which includes the over-eighties' pension; invalidity pension; all widows' benefits under the national insurance scheme—that is to say, widow's allowance, widowed mother's allowance, widow's pension or widow's basic pension; attendance allowance; constant attendance allowance or unemployability supplement under the industrial injuries or war pension schemes, payable to people who are permanently unfit to work; war widow's pension; industrial injuries widow's or widower's pension; supplementary pension. War pension will be a qualifying benefit where the person concerned is over pensionable age and retired—or over the age of 70 for a man and 65 for a woman if not retired.
Persons will be treated as entitled to a qualifying benefit if they would have been so entitled but for the receipt of some other overlapping benefit from public funds, or if the operation of an earnings rule has extinguished right to payment in respect of the qualifying week. This was a point that I raised on an earlier Bill introduced by the Conservative Government, and we have incorporated it into this Bill. Clause 2 also ensures that United Kingdom beneficiaries living in the Channel Islands, the Isle of Man and Gibraltar will get the bonus payment.
Clause 3 deals with the making of payments. Nearly 8 million of the beneficiaries are retirement or supplementary pensioners, the vast majority of whom will get payment at the post office when they cash their pension for the week beginning 18th November. Other payments will be sent by post. For

those getting their payment at post offices, action, in the form of sticking receipt slips in their books, will start in the week beginning 11th November.
Clause 4 deals with financial provisions. In the case of persons whose qualifying benefit is payable from national insurance funds, the payment will come from these funds, but national insurance contributions are not to be increased specially on this account, as they were last year under the Conservative Government. We have another Bill before us today which deals with national insurance contributions. Where the qualifying benefit is payable by the Exchequer the bonus will come from the Exchequer.
The bonus payment will cost £92 million and will, as I have said, be tax-free. So this Bill is a considerable contribution to the happiness of 9 million people this Christmas, and I confidently commend it to the House.

4.35 p.m.

Mrs. Elaine Kellett-Bowman: I can think of no task that could be allotted to me in this House that would please me more than to welcome the right hon. Lady's conversion to the value of the Christmas bonus, pioneered by her predecessor, my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), and about which, I regret to say, she was so scathing when he introduced it two Christmases ago. On 20th November 1972 the right hon. Lady described the bonus as a "cheap substitute", and went on to add:
… it reflects the inadequacy of the Government's own recent uprating.
She went on to say—digging her own grave even deeper—
… it is only six weeks ago that the Government carried into effect what was supposed to be their proper and fundamental answer to the old people's needs."—[OFFICIAL REPORT, 20th November 1972; Vol. 846, c. 989.]
The hon. Member for Rotherham (Mr. O'Malley) now Minister of State, on the same occasion described the bonus as a
stop-gap emergency measure".
If that was so in 1972, it is certainly even more the case in 1974. Inflation has already taken a very large bite out of the pension uprating which the right hon. Lady set as her target two years ago, announced in March and paid in July.


Pensioners will have to wait a whole year before they get any further increase instead of receiving a six-monthly up-rating in January, as they would have done under the Conservatives.
Yes, our pensioners and disabled certainly do need a Christmas bonus under Labour. But one thing puzzles me. This year the relevant date for entitlement to the bonus is 18th November, eight days earlier than last year and a fortnight earlier than in 1972. Yet I vividly recall how, last year, Member after Member on the Labour benches, led by the hon. Member for Goole (Dr. Marshall) with the right hon. Member for Deptford (Mr. Silkin) lending his not inconsiderable weight to the charge, demanded that everyone who reached pensionable age before Christmas should be entitled to the bonus. I confess that I had considerable sympathy with that view, as had my hon. Friend the Member for Somerset, North (Mr. Dean), who was then Under-Secretary of State.
The date fixed by the Conservative Government, which aroused such fury in the Labour Party, was the week ending 1st December. The date this year is the week ending 23rd November, which means that many more people who will become pensioners between 23rd November and Christmas will be deprived of the bonus. Clearly, the right hon. Lady is not interested, because she is chatting instead of listening to what is being said.
Why should the administrative process be so much longer in this matter under Labour, to the detriment of so many? I find it a little strange, too, that while the Secretary of State has promised to uprate other benefits, albeit only once a year, she has left the rate of the Christmas bonus exactly as it stood when my right hon. Friend introduced it two years ago. I find it all the stranger since, when discussing our Bill last year, the right hon. Member for Deptford said:
…why is the bonus this year only £10, because that figure has inflated considerably during the last 12 months? I am astonished that the Government are so unrealistic about this. If they really think that £10 today has the value of £10 a year ago they should go and see some old-age pensioners who may be able to tell them what has happened."—[OFFICIAL REPORT, 19th November 1973; Vol. 861, c. 576.]

Mr. F. A. Burden: Is it not the case that the Government have

to introduce the Christmas bonus because if they failed to do so there would be uproar among pensioners and others? This is not a voluntary act but one forced upon them by the fact that the Conservative Government introduced it.

Mrs. Kellett-Bowman: My hon. Friend the Member for Gillingham (Mr. Burden) is undoubtedly right. That is why I referred to the right hon. Lady's conversion. As I was saying, the criticism about the level of the bonus was made last year. How much more serious are the ravages of inflation on the £10 bonus now under the very harsh eye of "Mr. 8·4 per cent." for the pension is now only worth £7·42. Why has it not been uprated to £12·57, which would keep it in line with inflation.
Nevertheless, despite my disappointment that the bonus has not been uprated to take account of inflation, I am delighted that, after her disparaging remarks of two years ago, the Secretary of State has decided to follow our example and continue the Christmas bonus. I am delighted because I have found in my constituency, and I am sure that other hon. Members have found the same, that this Christmas bonus means a great deal to the recipient. It often makes an otherwise drab Christmas more cheerful by enabling those receiving it to buy a few little extras. In addition, many have told me that they value it even more highly because it gives them a chance to buy a few presents, particularly for grandchildren and the friends who visit them at Christmas time.
However, the Opposition firmly say that it is essential for the long-term wellbeing of our older citizens to bring in wider measures, such as the tax credit system and the occupational pension scheme, which were passed by the House before the February election but abolished by the right hon. Lady, who thus destroyed at a stroke the chance that people would have had from next April to build up a second pension. Those two measures taken together would render a Christmas bonus unnecessary.
But until such measures are carried out the need for a Christmas bonus will remain. I am glad that a larger number of widows and disabled will get the bonus, but the problem is to decide whom to leave out of its scope, for the wider the cover extends, the more anomalies


and unhappiness are created. My hon. Friend the Member for Somerset, North will deal with these matter later. However, I am very glad indeed that the Secretary of State has followed our example in making the bonus tax-free and is continuing our practice of not having it taken into account for other purposes such as rent and rate rebates and the calculation of supplementary benefit.
In short, the Opposition are glad that in this Bill at least the Government are following a good Conservative example. We shall give the Bill a fair passage, devoutly hoping that the Government will refrain from spending the taxpayers' money so lavishly on doctrinaire measures, such as nationalisation, so that money will still be available for essential welfare purposes such as this.

4.43 p.m.

Dr. Edmund Marshall: I propose to ignore the cantankerous parts of the contribution by the hon. Lady the Member for Lancaster (Mrs. Kellett-Bowman) and to turn immediately to welcome the fact that the scope of the bonus payment has been considerably extended. A very large number of people in receipt of benefits will enjoy this bonus this year under the present Government.
As has just been intimated, there is one further extension of the bonus which I would have welcomed, and I hope that Ministers will keep it in mind if similar occasions arise in future. Last year I pointed out that the Bill then being passed by the House would not permit the payment of the bonus to pensioners who reached pensionable age before Christmas Day but after the end of the relevant week in which the payment was made. Last year that was a period of three weeks.
As has been pointed out, this year more people will be affected by this problem. As the Bill stands, any elderly people reaching pensionable age after 24th November will not qualify for the bonus. My estimate, which is based on figures from the Registrar-General, is that about 50,000 people will be affected in this way. They will be pensioners before Christmas, but they will not receive the bonus payments authorised in the Bill.
This is an anomaly. There is no question of any party points to be scored here, for it is an administrative anomaly.

I hope that during the debate Ministers will say that consideration is being given to how the anomaly may be ironed out for future occasions. While it is good that the payments to pensioners in general are all to be made in a relevant week in November, there ought to be some method by which those who reach pensionable age afterwards receive the bonus with the first payment of their pensions. I made the same point last year, and I hope that, if we have the same kind of bonus payments in future years, we shall be able to extend these provisions as I have suggested.
However, we have made good progress this year in extending the scope of the payments to whole new categories of pensioner, and on that Ministers are to be congratulated.

4.46 p.m.

Mr. Cyril Smith: I, too, add my congratulations to those offered to the Government on the introduction of the Bill. I have long taken the view in politics that the art of campaigning does not disbar the art of charitable understanding. If I may say so to the hon. Lady the Member for Lancaster (Mrs. Kellett-Bowman), I do not believe that it does the art of politics any good to fail to recognise the good in the policies of one's opponents.
Frankly, I compliment the Government on introducing the Bill. I shall not carp about the Bill. I think that we should say that it is an excellent Bill and that we welcome it. I compliment the Secretary of State on it, and I do so not only on my own behalf but on behalf of all my colleagues on the Liberal benches.

Mr. R. J. Maxwell-Hyslop: Where are they?

Mr. Smith: The percentage of Liberals present is greater than the percentage of Conservatives present. Certainly if the matter is to be judged by weight rather than by numbers, the Liberals are more strongly represented.
Secondly, I wish to compliment the Secretary of State on having included in this Bill the many deserving cases that have been left out of past Bills. I have taken the trouble to look up the record of debates in 1972 and 1973 to see what criticisms the right hon. Lady and her


hon. Friends had to make of earlier Bills, and I see that they have all been covered in this Bill. Ministers are to be complimented on that.
I am glad too—and I hope that I am correct in this assumption—that there is to be no scaling down of the £10 bonus according to the level of a person's stamp contributions. Such scaling down always creates problems and anomalies. I hope that at some time when later Bills are being considered Ministers will try to get over this anomaly and that pension increases introduced because of increases in the cost of living will not be scaled down because a person has not contributed the full number of stamps. Such a person may already not be getting the full basic pension and should not also suffer having the increase scaled down in relation to the basic pension. I am delighted that it is not to be done on this occasion, and I hope that the matter will be covered in future pension increases.
I have always argued that economic problems are not the only problems of age. A major problem of age is that of loneliness, not just economic deprivation. I take the opportunity to urge the right hon. Lady, whom I know to be a very charitably-minded lady, if I may say so in sincerity, a person with a depth of compassion, to consider the possibility of remitting television licence fees for pensioners, who find the cost of such a licence a desperate problem. That would go a long way to combating the problem of loneliness.
There is also the problem of mobility for the aged. If we could introduce some statutory means of having a uniform system of concessionary fares for pensioners, that, too, would help a great deal. I say that intending in no way to criticise this Bill. I say it simply because I see this as an opportunity to make the point whilst I have the floor.
I am delighted that the Government have introduced the Bill. One of my problems during the General Election campaign was that a number of old-age pensioners in my constituency were canvassed by perhaps over-enthusiastic Labour supporters and told that if they did not return a Labour Member for Rochdale this time they might lose their £10 Christmas bonus. I am glad to say that, in spite of not taking that advice,

old-age pensioners are to have the bonus, albeit that it may be due to the fact that none the less the electorate returned a Labour Government. At any rate, the Bill gives the lie to that myth.
By the time that it becomes necessary to introduce a future Bill for a Christmas bonus, I hope that the Secretary of State will have been able to look favourably upon the Finer Report and be able to include one-parent families in any future £10 bonus.
I agree with the hon. Member for Lancaster and others who could, and no doubts will, make the point that pensions should be tied to average earnings and that the sooner that is done the better. But any Government, whatever their complexion, are faced with the economic problems of the nation, the amount of money available, and so on. Until these basic changes in the pension scheme can be introduced, we must continue to ensure that our pensioners are allowed to live and not merely exist.
I am delighted that the right hon. Lady has introduced the Bill. I assure her that she can rely on the support of the Liberal bench in this matter.

4.52 p.m.

Mr. James Kilfedder: I welcome the Bill and congratulate the right hon. Lady on introducing it. This is the third occasion on which old-age pensioners will receive the bonus.
I cast my mind back to my maiden speech 10 years ago which contained an appeal for the payment of a £10 Christmas bonus to retired people. The Minister in the Labour administration at the time was Miss Margaret Herbison, a woman of great compassion. My appeal was turned down. Miss Herbison said that she had been advised that it was impossible late in October to make any payment in time for Christmas or even, as I recall, until about March. I am not certain of the exact timetable, but certainly the House was told that it could not be paid in time for Christmas. Clearly, we have made great advances since then if such a payment can be made at this short notice.
Even 10 years ago when I made my special plea for a Christmas bonus for pensioners I felt that £10 was barely adequate. I found no sympathy among my Conservative colleagues at the time, but


I am glad that it has been found possible since then to make such payment, which has been greatly welcomed by the elderly. As I say, even in 1964 I thought that £10 was barely adequate. Even then it seemed a relatively small amount compared with the large sums spent at Christmas by the average family and by young adults generally.
Average wages today are about £35 or £40. In view of present day costs of food and clothing, a payment of £10 to the old at Christmas is hardly an overgenerous donation. In these days of inflation in prices and wages, £20 would seem to be a better sum with which to buy shoes, clothes and fuel. We could debate at length what could be or should be paid to the elderly, but I know how much the payments were appreciated on past occasions by pensioners in my constituency and throughout Northern Ireland. I am sure that the experience of other hon. Members is the same.
I want to echo the remarks of the hon. Member for Rochdale (Mr. Smith) about television licences and concessionary fares. These are matters which I have been urging for some time, and I hope that the Government will give them further study. This is a payment of £10 for Christmas, but we must combat loneliness throughout the year. For that reason, I feel that some help should be given to the aged with television licence fees, and especially with bus fares in order that they may keep in touch with their families and go shopping.
I should like to think of these payments by the nation as a Christmas bonus from the young to our senior citizens, as a token of good will and understanding of Christian charity in its fullest meaning from children to their parents or grandparents. There has been a decline throughout the nation in filial duty, just as there has been in family life. The nation is the poorer for it. Payments like this help to jog people's memories and make young people aware of the needs of the old. For that reason, the Government are acting rightly in putting this Bill before the House. However, I should like to think that on the next occasion, with inflation, the sum will be greater and that in the meantime the elderly will be helped in other ways as

well. In any event, there is no doubt that if this Christmas bonus was not paid and we did not urge it upon the nation, the country would be the poorer spiritually and morally.

4.56 p.m.

Rev. Ian Paisley: I want to identify myself with hon. Members who have given a great welcome to this Bill. Those of us who are engaged in constituency work know how much past bonuses of this kind have been appreciated by those who have received them. But we have also known how badly put out others felt because they were not included in the original scheme. For that reason, I welcome the widening of the scheme. I know that it will be generally welcomed by the nation as a whole, especially Northern Ireland.
Sometimes hon. Members from Northern Ireland constituencies are accused of not taking an interest in social welfare matters. I ask the House to note the good turnout of hon. Members from Northern Ireland today and the interest that they are taking in the social affairs of the nation. With due respect to the hon. and weighty Member for Rochdale (Mr. Smith), I think that the presence of the United Unionist side today is a good deal stronger than that of the Liberals. However, we are glad to have the hon. Gentleman with us and to have his weight on our side on this occasion.
I have been wondering about the difference in value between the original £10 and the £10 proposed to be paid this year. There has been a considerable deterioration in the spending power of £10 in the past two years.
Then I return to the query which I raised with the Secretary of State a little earlier. There are certain sub-post offices scattered over Northern Ireland which have not been able to pay out this benefit. The result has been that some of our constituents have had to travel considerable distances before finding a post office which was doing this paying out. Is it possible for sub-post offices throughout Northern Ireland to pay out these sums? That would be of great assistance to the aged, the infirm and the needy, who otherwise will have to make fairly long journeys in today's dangerous security conditions.
I welcome the Bill. I trust that when we next discuss such a proposal this House will be able to enlarge the amount and possibly even double it.

5.0 p.m.

The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): I am grateful to all parties in the House for the generally warm welcome that has been given to the Bill.
It is my pleasure to congratulate the hon. Member for Lancaster (Mrs. Kellett-Bowman) on the first occasion that she has spoken from the Front Bench, and certainly the first occasion when we have spoken across the Floor of the House from the Front Benches in the same debate. May I, with great good humour, say that on a Bill of this kind I thought that she was remarkably cantankerous, as my hon. Friend the Member for Goole (Dr. Marshall) said. I agree that she was perhaps somewhat strident. It is always a difficult lesson in politics to know when to take a highly party political line and when to be gracious about legislation brought in by the Government. I suggest that on this occasion the hon. Lady misjudged the mood of the House and what was needed from an Opposition Front Bench speaker.
The hon. Lady said that she welcomed our conversion to the principle of paying a Christmas bonus to pensioners. The Christmas bonus was part of the Labour Party's election manifesto. It is interesting to notice that it was not part of the Conservative Party's manifesto. We can only assume that, on the basis of the periodicity of the upratings to which the right hon. and learned Member for Surrey, East (Sir G. Howe) referred in earlier debates in the House of Commons, it was not their intention, had a Conservative Government been returned, to implement a Christmas bonus this year. Therefore, to the extent that the hon. Member for Rochdale (Mr. Smith) remarked on the observations made by Labour Party canvassers in his constituency, had a Conservative Government been returned it certainly was not part of their election manifesto.

Mrs. Kellett-Bowman: My right hon. and learned Friend made it clear throughout the election, as did the rest of my right hon. and hon. Friends, that we took it for granted that, having originally done

this, we would automatically go on doing so. Indeed, we said so loudly and clearly. Right hon. Gentlemen opposite had never included it before. We were the pacesetters, and the whole country knows it.

Mr. O'Malley: If I may help, the hon. Lady appears to be saying that it is a bit like the 9½ per cent. mortgage which was talked about during the election. On previous occasions I think that, looking at the low level of the pension which we had to jack up by 29 per cent. to £10 and £16 when we came into office, we were justified in saying that the £10 bonus that the Conservative Government paid was a substitute for a better and higher level of pension. When we used to ask for a higher level of pension the then Under-Secretary told us how extravagant it was and that the contributors and our national resources could not afford the increase that we put into effect at the first possible date after the return of a Labour Government, albeit a minority Government, in February this year.
We have tried to improve the proposals that we inherited. We have brought in a further 1 million people. The hon. Member for Lancaster will be aware that her leader, amongst others, has said that we are in the middle of a severe economic crisis. Yet we have brought in these extra 1 million people. This brings the total cost to £92 million. I think that the hon. Members for Down, North (Mr. Kilfedder) and Antrim, North (Rev. Ian Paisley) in their observations and questions recognised that we are in a time of economic difficulty. If the question is asked, "Is it right to do more for the pensioners in this or in any other direction?", of course it is always right bearing in mind the level of provision on which 8 million retirement pensioners have to depend at present.
The hon. Member for Antrim, North asked what the equivalent figure would have been had there been an uprating of the £10 level. Compared with last year it would be £11·40. We included these extra 1 million recipients—widows and invalidity pensioners—because we thought that was the right priority in the circumstances.
The hon. Member for Lancaster referred to the date of the payment—the week beginning 18th November. The hon. Lady will recognise that we are in


the hands of the Post Office, which has a very busy Christmas period. The House is already aware that beef tokens will be issued in due course, That is another load that will have to be taken by the Post Office. We are paying the £10 bonus as near as possible to the Christmas period.
The hon. Member for Antrim, North asked whether all post offices in Northern Ireland would be able to pay out these benefits. My right hon. Friend could not give the answer immediately. I had to ask for a note on the subject, which I have just received. I understand that the Department of Health and Social Services for Northern Ireland has no knowledge of any general difficulty. Officials are aware of some post offices experiencing difficulties with coinage, and they point out that other post offices have been damaged by bombs. If the hon. Gentleman or any Northern Ireland Member knows of any specific problems and will let me have the details I will ensure that everything possible is done to minimise the difficulties which may arise.
My hon. Friend the Member for Goole generously recognised that the Government have made significant improvements in the proposals that we are now considering. I understand, and have a great deal of sympathy with, the point made by my hon. Friend. The difficulty is that the payment of the bonus is linked to the payment of a qualifying benefit in a particular week. I assure my hon. Friend that I have noted his observations on this subject. I think that it is right that any observations or comments on the defects inherent in or arising from the scheme should be placed on record so that they can be suitably and accordingly considered by the Government when examining this kind of problem.
I conclude by again thanking the House for the generally warm welcome that it has given to the Bill.

Question put and agreed to.

Bill accordingly read a Second nine.

Committed to a Committee of the whole House.—[Mr. Coleman.]

Further proceedings stood postponed, pursuant to the order of the House this day.

Orders of the Day — PENSIONERS' PAYMENTS [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act of the present Session to make provision for lump sum payments to pensioners, it is expedient to authorise—

(1) the payment out of money provided by Parliament of sums payable by the Secretary of State in pursuance of provisions of the said Act of the present Session providing for him to pay £10·00 in respect of any person;
(2) the payment out of money so provided of the administrative costs incurred by any Minister of the Crown or Government department under the said Act of the present Session;
(3) the payment into the Consolidated Fund of so much of the administrative costs incurred by a Minister of the Crown or Government department under the said Act of the present Session as relates to sums paid by the Secretary of State out of the National Insurance Fund or the Industrial Injuries Fund under provisions of that Act providing for him to pay £10·00 in respect of any person.—[Mr. Coleman.]

Orders of the Day — PENSIONERS' PAYMENTS BILL

Considered in Committee pursuant to the Order of the House this day.

[Mr. GEORGE THOMAS in the Chair]

Clause 1

LUMP SUM PAYMENTS TO PENSIONERS

Question proposed, That the clause stand part of the Bill.

5.8 p.m.

Mr. Robert Boscawen: We do not intend to delay the Committee long on this stage of the Bill. We realise that, by and large, it commends itself to all hon. Members on both sides.
We welcome the fact that hon. Gentlemen opposite have accepted the measures that, by and large, we introduced two years ago and have now carried them further. However, it is important to get the Bill right. In previous years hon. Members received a considerable amount of correspondence about anomalies in the legislation. It appears that the indignation and concern that arise from the


anomalies is in inverse proportion to the amount of the payment that people receive. This Bill is building on experience of the past two years. It widens the basis for giving help to people above retirement age to a large number of people who, in the main, are on long-term benefits. If it is to be done at all, I am sure that this is the right way to do it, because these are the people most deserving of help.
None of this can alter the fact that the credit for starting this measure goes undoubtedly to my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who introduced it, and to my hon. Friend the Member for Somerset, North (Mr. Dean), who did so much to get it started and to smooth out many of the anomalies in the first two years of its introduction. Inflation has since then become much worse, and prices are in danger of getting out of control altogether, and it is the pensioners who suffer most. However, the Christmas bonus goes some way to restoring the balance by easing in a small way the lot of pensioners, and brings much happiness to many people who otherwise would not receive it.
The first question that I should like to ask the Minister is whether he will ensure that everyone entitled to receive the bonus, including people, particularly war pensioners and those on industrial injury benefits, who receive their pensions by means of Giro cheque, quarterly or monthly through the post, receive it by Christmas. This is an important matter, and I hope that the hon. Gentleman will ensure that the small number of people who do not obtain their pension from the Post Office receive it at the right time.
My second question has already been raised by the hon. Member for Goole (Dr. Marshall). The former Opposition made great play of the fact that a considerable number of people became entitled to a Christmas bonus between the period of the qualifying week and Christmas Day. We have had a flimsy explanation from the hon. Member for Rotherham (Mr. O'Malley), who has just replied to the Second Reading debate and who supported the hon. Member for Goole in last year's debate. I should have thought that he would have taken the

trouble to do a little more homework than he has done. He should look into the matter again. I hope that means will be found by which it will be possible to pay the bonus to people who qualify before Christmas Day.
I turn to the question of eligibility, which is dealt with in Clauses 1 and 2. The Department has been advised to base eligibility for the benefits on the receipt of a qualifying benefit. But such a qualification in the case of women who are over 60 and men who are over 65 years of age is not necessarily the sole criterion of need.
Some people who do not qualify for a State retirement pension and are not in receipt of long-term supplementary benefit are very poor indeed. Unfortunately, they do not have a sufficient contributory record, more often than not through no fault of their own. Some of them are divorced women who were unaware that their husbands had not been contributing fully. Some of them worked abroad, no doubt doing good for this country but in countries with which we do not have reciprocal arrangements. Others, particularly unmarried daughters of elderly parents, do not have the means to pay contributions before reaching retirement age. Such people are left out of the bonus.
5.15 p.m.
Surely the purpose of the Bill is to put some small extra purchasing power into the pockets of people for whom there is likely to be no other benefit. Would it not be a simpler and fairer procedure if all those of pensionable age automatically received the bonus irrespective of their contributory record, provided they could satisfy a qualification of residence for a definite period?
We should also like to see younger widows included in the Christmas benefit. May I say in passing that we have come a long way since the 10s-widow days, because now people are receiving a £10 bonus for Christmas. It was not until my right hon. Friend the Member for Leeds, North-East introduced the sliding pension for all widows over the age of 40 without children that notice was taken of these people. We therefore owe my right hon. Friend a debt in retrospect for making it possible for these people to be included in the Bill.
I should be grateful if the Under-Secretary of State would explain why war pensioners do not qualify earlier than the age of 70 in the case of men and 65 in the case of women.

The Chairman: As I read Clause 1, it is concerned only with the £10 payment. I hesitated to interrupt the hon. Gentleman, but the substance of Clause 1 concerns the £10 payment.

Mr. Boscawen: I agree that this matter arises on Clause 2, Mr. Thomas, and I shall raise it when we reach Clause 2, when I shall ask for a further group of anomalies to be considered.
I should be grateful if the Under-Secretary of State would say why all retirement pensioners, when they reach the age of 60 in the case of women and 65 in the case of men, should not be eligible for the bonus.

The Under-Secretary of State for Health and Social Security (Mr. Alec Jones): I should like to try to deal with the complicated points raised by the hon. Member for Wells (Mr. Boscawen). I am in some difficulty, since that means transgressing into Clause 2. I am sure that you, Mr. Thomas, will either call me to order or close your eyes to it as the situation demands.
The hon. Member and I have sat on many Committees dealing with these matters. Whenever attempts have been made by either party to draw a line in dealing with this bonus, some people have always been left outside. That is happening this time to the categories he mentioned. When the Conservative Government introduced this scheme, it was rough and ready. Over the three years since, we have succeeded in refining and improving it. We have not achieved perfection, but we have gone a considerable way this time by including an extra 1 million people. Although we have not been able to include all the categories that he has described, we have taken to heart the criticisms levelled in the past from both sides of the House. On some future occasion I hope that we can deal with this type of case.
When the Secretary of State said that she hoped that all payments would be made before Christmas she meant that it was the Government's intention that

all those entitled to the payment should receive it. She used that form of words because she was allowing for the fact that some people returning from abroad, for instance, would not be able to receive it. Whether they receive it through the order book or by Giro cheque, arrangements are being made to ensure that there will be no avoidable delay in paying this money.
We have done as much as possible in the present circumstances. The extension of the payment to another million people is a reasonable step. As for the timing, we are anxious that all those who qualify will receive the payment. That is why we were anxious to ensure that there would be no difficulties in Northern Ireland.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2

INTERPRETATION

Question proposed, That the clause stand part of the Bill.

Mr. Boscawen: I will now seek to raise the matter that I was not in order in raising in the previous debate. Why is it that war pensioners of 70 in the case of men and 65 in the case of women 65 will not qualify for this payment at the earlier ages at which ordinary pensioners qualify? When they see others who retire at 60 or 65 will, rightly, be able to get this bonus even if their pension is completely extinguished by the earnings rule, they wonder why they cannot get it until the later age.
Am I right in understanding that those on long-term supplementary benefit for two years or more who are under 60 or 65 are not entitled to this bonus? This applies to 300,000 people, a number of whom are disabled and many of whom have not been able to work all their lives and build up contributions but are in great need. About 250,000 of these people are the very ones that the Secretary of State will be helping during the year with her disability payment, a similar measure to one that we were pledged to introduce. It seems a pity that they cannot be included in this measure.

Mr. O'Malley: I am grateful for the hon. Member's queries. He is right in


assuming that long-term recipients of supplementary benefit who are under pensionable age will not be eligible under the Bill for the Christmas bonus, either on their own behalf or on behalf of their wives. I think that hon. Members understand not only the financial but the difficult administrative problems which such an exercise would involve. Of course I understand and sympathise with the point —there is no difference between us on that—and we have found it possible to extend the categories, in number, by about 1 million.
I am pleased to be able to tell the hon. Gentleman that he is wrong to assume that war pensioners over retirement age are being treated in an inferior way to recipients of the retirement pension. A man over retirement age becomes entitled to the £10 bonus only if he is receiving or has title to the retirement benefit—or, in a few cases, an invalidity benefit. Therefore, retirement pensioners who are retired or retirement pensioners who are doing some part-time work but are still in receipt of a pension because of the provisions in the National Insurance Acts—the earnings rule has a bearing here—are entitled to the bonus. That is so not only if they are receiving the retirement pension but if they are affected by the earnings rule.
An individual over pensionable age who has not retired is not entitled to the bonus until he reaches the age of 70, and exactly the same considerations apply to war pensioners over retirement age. However, the categories of war pensioner who will be entitled to a Christmas bonus who are under pensionable age are those receiving the unemployability supplement or the constant attendance allowance, because those are two of the qualifying benefits.
I hope that I have made myself understood in a difficult area. The war pensioners over retirement age are treated exactly the same as any other person over pensionable age receiving a qualifying benefit. Second, war pensioners under retirement age but receiving one of the qualifying benefits listed in the Bill will also be entitled to the bonus.

Mr. R. J. Maxwell-Hyslop: The Gracious Speech said that the Government would introduce legislation to end sex discrimination. The Government

having announced that intention, is it not anomalous to bring forward legislation under which men have to be five years older than women before they can receive the £10 bonus? If the Gracious Speech means what it says, when will the legislation to end sex discrimination with respect to the age of receiving pensions be introduced? Will it overtake this £10 bonus?

The Chairman: Order. I think that the Minister will be hard put under the terms of "interpretation" to give that guarantee and still remain in order.

5.30 p.m.

Mr. Maxwell-Hyslop: He would, indeed, Mr. Thomas. But this is an anomaly which has been spotlighted by the Government in the Queen's Speech. I put it to the Minister that it is wrong to introduce a Bill containing such an anomaly when the Queen's Speech has said that there is to be legislation to get rid of this anomaly because it is sex discrimination. I am looking forward to hearing from the Minister before this Committee stage is ended how he intends to implement the undertaking given in the Queen's Speech.

Mr. O'Malley: I should like to reply to the hon. Gentleman, while trying hard to keep within the rules of order. I understand that the hon. Gentleman is now the first member of the new party of abstainers in this Parliament. I congratulate him on that. However, it is rather unreasonable for the hon. Gentleman to expect the new Government, of only three weeks, to sweep away within such a brief period what he sees as an anomaly but what has persisted throughout the whole of the post-war period and for even longer than that. As there is a very serious point about the difference in statutory retirement age between men and women—namely 65 and 60—I think I can assure him, without straying from the rules of order, that there will be debates not too far in the future when he will be able to make his comments on that subject. I hope that he will be able to support the general proposals that we bring forward in legislation enshrining our own proposals for long-term pensions.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

Clauses 3 to 5 ordered to stand part of the Bill.

Bill reported, without amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third tune and passed.

SOCIAL SECURITY AMENDMENT BILL

Order for Second Reading read.

5.32 p.m.

The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley): I beg to move, That the Bill be now read a Second time.
With the exception of the hon. Member for Lancaster (Mrs. Kellett-Bowman), we have had something of a House of Commons "love-in" on the previous Bill. But on the basis of the evidence on the Order Paper—namely, the amendment tabled by the Conservative Opposition—I gather that this is due to end immediately we commence our discussions on this Bill. I do not complain, either to the hon. Member for Lancaster or to anyone else, about some controversy in the House on any subject on which it is sensible to have controversy, although I doubt very much the common sense and judgment of the Opposition in putting forward an amendment such as that on the Order Paper.
The principal provisions of the Bill are those which were contained in the Social Security Amendment Bill which received an unopposed Second Reading on 1st July last. However, progress on that Bill was prevented by the intervention of a General Election. The inevitable delay arising from that happy event—if I may describe it as such to the Conservative Opposition—makes it essential to proceed urgently with this legislation. Any failure to do so would be bound to cause confusion, inconvenience and administrative difficulty to employers and would put at risk the effective introduction of the new earnings-related contribution system, the desirability of which is agreed in all parts of the House.
It is, therefore, all the more surprising that, with this background and in these circumstances, the Conservative Opposition, after giving an unopposed Second Reading to the previous Bill in July—while saying, as they were entitled to say, that there were some provisions in the Bill which they wished to oppose and discuss in Committee—have now decided that they intend to vote against the whole of the contents of this Bill on Second Reading.
I want to tell the Opposition exactly what are the implications of the amendment on the Order Paper and what the results would be if their amendment were carried tonight. First, the contributions which could be levied with the start of the earnings-related contribution system in April 1975 would revert to the levels set in the Social Security Act 1973. If that were to happen, neither the Government nor the National Insurance Fund could pay the £10 and £16 pensions which were brought into operation on 22nd July, let alone put into effect any increases.
In that context, the Conservative Opposition spoke during the General Election campaign about the desirability of increasing pensions as early as January 1975. But it would not only be a reversion of the contribution levels to those set in the Act of 1973, which would quickly bankrupt the National Insurance Fund and prevent the payment of £10 and £16 pensions. We should automatically revert, unless there was further legislation, to pensions and levels set in the schedules to that Act; that is, pensions of £6·75 and £10·90.
I do not believe that any hon. Member who is as intelligent and as experienced as the right hon. and learned Member for Surrey, East (Sir G. Howe), who leads for the Conservative Party on this subject—even though he was one of the principal architects of the Industrial Relations Act—can have failed to look at the full implications of the amendment on the Order Paper. Not only would we go back to the levels of 1973 if the amendment were carried, but we could put at risk the introduction of an earnings-related system of contributions which has been debated and agreed long ago by the House.
The Conservative Party, not for the first time in recent months, is certainly


not carrying out the rôle of a responsible Opposition by tabling this kind of amendment, but is culpable of dangerous irresponsibility in handling the official Opposition.

Mr. David Mitchell: I have been listening attentively to the Minister. So that we may judge the validity of the point that he has been making, will he say by how much the increases proposed in the Bill would bear on the average employee in industry?

Mr. O'Malley: That is precisely what I am about to do. One thing that is in my favour—although perhaps it is not in my favour—is that I have already made a speech on the Second Reading of a virtually identical Bill. If hon. Members want to equip themselves with the kind of facts that I shall be using, although I hope to deploy some new facts, they are available and have been set out in detail. I am sorry that the hon. Gentleman has not had time to do that before coming to a serious debate, although I appreciate that Members of Parliament are often very busy.

Mr. David Mitchell: rose—

Mr. O'Malley: The hon. Gentleman must not get touchy. I am not attacking him for not reading my previous speech, although he might have done so.
The purpose of the Bill, which will be welcomed by pensioners, is to continue to bring enough money into the National Insurance Fund to pay the higher level of retirement pensions and widowhood and other benefits—that is, the £10 and £16 pensions and the further increases in line with national average earnings envisaged in the uprating Act of the previous Parliament. Therefore, the purpose is to maintain a level of pensions and an improvement in pensions which was certainly envisaged in the Social Security Act 1973 of our predecessors.
With that in mind, the most useful way for me to proceed will be to describe the impact of the Bill, as the hon. Member for Basingstoke (Mr. Mitchell) requested, on the various classes of contributors.
In this context it is important to bear in mind the merits of an earnings-related contribution system. The difficulty and the great defect of a flat-rate system is that, when it is desired to raise large

amounts of money through such a system, automatically by loading on to the flat rate one begins to impose intolerable levels of contribution in percentage terms upon those who are the lowest paid. Indeed, we had reached that situation long ago. That was one of the reasons why the Boyd-Carpenter graduated proposals were brought forward. Therefore, an earnings-related system is more equitable in that it means that there is payment according to ability to pay. I think one of the few successes following pensions debates which have taken place in the House over the last decade is that we now have an agreed system of earnings-related contributions in operation as from April 1975.
In that context of earnings-related contributions and with a background of the need to bring in substantial amounts of money to pay retirement pensions at the new higher levels for a rapidly increasing pensioner population, the most useful thing I can do is to examine with the House the impact of the Bill on the various categories of national insurance contributors.
I will first consider the contributions which employees in class 1 will pay out of their wage packet.

Mr. Kenneth Clarke: The Minister is kind to give way so quickly. Before he turns to class 1, which I understand he is about to do, we on this side would be interested to have an explanation of what has happened to Clause 1 of the Bill as presented to the House on 1st July. That Bill began with important provisions easing the impact of the earnings rule. We trust that the Minister with his customary ingenuity has found an alternative way of dealing with that, because the provisions do not appear in this Bill. We should be grateful for an explanation of what means he has adopted to replace Clause 1 of the previous Bill.

Mr. O'Malley: I had intended to give that explanation. I will do so now. As the hon. Gentleman will be aware, the Government announced in the Gracious Speech that there would be further upratings of social security benefits. The hon. Gentleman will therefore expect, as we are bound by law to provide an up-rating not later than next July, that there will be an up-rating Bill coming before


the House at some time in the future. We considered that we should put into this Bill that part of the business dealing with contributions and that the matters to which the hon. Gentleman referred, and specifically the earnings rule, would be better dealt with in an uprating measure which contained schedules giving levels of benefits rather than in this Bill. I assure the House that the Government certainly do not intend to go back on the operation of the earnings rule.

Mr. Clarke: I am reassured by that. I may have misunderstood, and I hope that I did. Does the Minister mean that the improvements in the earnings rule contained in the first form of this Bill will now be delayed as a result of this decision and will not come into effect in April 1975, as the provisions of this Bill will, but will have to wait for the next uprating Bill, so that the easing of the earnings rule is now being pushed back by some months to at least July of next year? Is that the position?

Mr. O'Malley: The hon. Gentleman is trying too hard. There is no intention of pushing back the operation of an eased earnings rule beyond April. The earnings rule is operating now. Legislation is needed to deal with the post-April situation, and in the uprating legislation which we bring forward all those matters will be dealt with. It was merely a matter of drafting advice as to the most appropriate place for specific pieces of legislation to be. I assure the House that there is nothing sinister about it.
For class 1 contributors the significance of the introduction of earnings-related contribution at 5·5 per cent. in April of next year for employees is that the majority of men and women in employment will pay reduced contributions. On 1st July the hon. Member for Rushcliffe (Mr. Clarke) complained that I was putting a favourable gloss on the contents of the Bill, so I think I should give a few examples to demonstrate the point I have made. I am not making any particular party claims here. It arises because of the nature of the earnings-related system.
All male employees up to well above £60 a week who are not contracted out will pay reduced contributions. I will take it at the top of the range, because

there are reductions all the way lower down. Even a man on £62 a week not contracted out will pay 24p less a week than under the existing arrangements. Even at the ceiling of the scheme—that is, roughly one and a half times national average earnings at the appropriate date —the employee not contracted out will be faced with an increase of only 13p a week. So throughout the whole of the range with the exception of those at the very top there will be reductions for those who are not contracted out.
As for those who are contracted out, there will be reductions in contribution again up to 60p a week. At £62 a week an employee at present contracted out of the present graduated arrangements or partially contracted out will pay 2p a week more. A man on the ceiling of £69 a week will pay 39p a week extra.
Whatever Government are in power, as we move the ceiling up, as Governments will move the ceiling up, as was envisaged in the Social Security Act, as the then Secretary of State and Under-Secretary made clear, inevitably we shall be drawing from a bigger band in money terms and therefore those contributions will rise because the ceiling will rise. That is one of the essential features of the scheme which comes with earnings relation but which is notably absent from a flat-rate scheme.
In the case of female employees not contracted out, up to £62 a week there are reductions in the employee's contribution. For a woman earning £69, there is a 26p a week increase. For women contracted out of the present arrangements, although there is a reduction at the bottom of the earnings ladder, there are increases of 17p a week at £23, 16p a week at £46, and 19p a week at £62. That is in the middle of the range. That reflects the levels of contributions and the disparities of treatment as between men and women in the older scheme. The fact remains that the majority of employees will be paying reduced contributions as from 5th April 1975.
I know that the right hon. and learned Member for Surrey, East has objections in relation to the self-employed and other matters. Is he really saying that those matters are incapable of discussion in Committee? Is not that the normal way to deal with these matters? Are


Opposition Members really opposing and putting at risk the introduction of the whole of an earnings-related scheme which can help all the class 1 employees, the bulk of employed people in this country? That is what would happen if their amendment were carried.
We are already up against au enormously tight timetable. There are already enormous administrative difficulties both for the Department and for employers, and I ask the Conservative Opposition to deal with this matter in the normal responsible way, through the Committee and Report stages, where matters on which we are at issue can be properly discussed, so that we can make proper progress in the normal parliamentary manner.
Secondly, with class I contributors, what about contributions of the employers? My right hon. Friend the Secretary of State announced in May that it was estimated at that time that a contribution level of 8·75 per cent. would be required from employers. In fact, we were happy to be able to say that that 8·75 per cent. estimate could be reduced to 8·5 per cent., where it stands in the Bill. Therefore, it leaves the share of national insurance contributions as between employers and other contributors roughly as it is in the existing arrangements.
The broad pattern is one of reductions in contributions paid by employers in respect of lower-paid workers and increases for the higher-paid workers. The range of increases is between 12p and 69p a week higher than the 7·5 per cent. level of contribution al the Social Security Act 1973. There was no argument about this in July, that by proposals of this kind, and only this kind, one can pay better pensions.
The country must be clear that if we are talking of helping our retirement pensioners, at a time when the working population is hardly likely to grow at all, and the pensioner population is quickly rising, that alone means that there is a bigger burden to be shared through taxation and contributions by employers and employees. We cannot provide better pensions without imposing bigger burdens on the working population as a whole, on industry and on the resources of the nation.
Thirdly, there is a minor but nevertheless welcome change in the Bill which affects the contribution requirement by retirement pensioners with some employment—those people who draw a pension but who are operating within the earnings rule, those over retirement age but not retired, who cannot meet the retirement contributions in category A, and women over pensionable age, not retired and subject to the half test. We propose in our White Paper "Better Pensions" to get rid of the half test. It has been the constant bane of all Members of Parliament and a grievance to large numbers of married women who, having paid contributions for a significant part of their working lives, found themselves getting little or no pension for their contributions.
What we propose to do in this Bill is to take away completely the liability on those people who have limited resources. In the 1973 Act there was a requirement for 0·6 per cent. contributions. We are removing any such liability. It is a small relief but we think it will be helpful and will be appreciated by the people concerned who, although they make no payments, will be covered for industrial injury purposes.
Continuing the list of the various categories, I come to two categories which concern the Conservative Opposition. I will deal first with the position of opted out married women and widows and secondly the self-employed, in respect of which I understand there is some difference between us. In fact, it amazed me that the Conservative Opposition should have believed that they could make enormous political mileage out of this during the General Election. The way they treated what I shall demonstrate was the structure of a Bill which they passed when in government was not only dangerously irresponsible but showed how they were prepared to wriggle in every way possible to get any short-term political advantage which seemed to be going.
The Opposition complain that the contributions of opted-out married women and widows, which we set at 2 per cent. as opposed to 0·6 per cent. in the 1973 Act, mean that those women will be paying an unfair share of the cost of better pensions. I ask the House to judge this. That statement is a gross distortion of the


truth. If I were speaking outside the House I would use rather stronger language, although I would be going beyond the normal parliamentary conventions if I were to do so in the House, and certainly with you in the Chair, Mr. Deputy Speaker, I would not attempt to do that because I know that you would stop me immediately.
I want to illustrate what hon. Members opposite describe as an unfair share of the cost of better pensions. I say this against a background of 8 million pensioners and a work force growing hardly at all—that is what all the estimates show— for the rest of this decade and indeed into the 1980s. Hon. Members complain that we are putting up the married women's and widows' contributions to 2 per cent. and that we are being unfair to these married women.
Let us see what the change will be. I am dealing with a non-contracted-out married woman on the reduced rate under the present arrangement and comparing it with the new arrangement in April 1975 about which the Conservative Opposition are complaining. What does "grossly unfair treatment" mean? It means that a woman on £23 a week, not contracted out, will pay 38p a week less than she is doing now. A woman on £46 a week will pay £1·18 a week less than she is paying today. It goes on, up to the ceiling, so that a woman on £69 a week will pay £1·57 a week less than she is paying at the moment.
Taking contracted-out women, a woman on £23 a week will pay 1p more. Because of the incidence of the scheme it hits the person who is lower down. In the case of a woman on £46 a week, contracted out, the sum is 80p less; £60 a week, £1·33 less, and £69, £1·19 less. That is what hon. Members opposite call gross unfairness to married women.
I know what the argument is. The Opposition say that those married women were paying contributions and that those contributions brought in graduated benefits. Well, that was a good deal, was not it? For every £9 that they paid, they got an uninflation-proof 6d—2½ new pence. If they had earned that 2½p in 1965 and retired in 1995, they would get 2½p in money terms, unchanged. With decreases of this kind at a time when

there is a chronic need to help retirement pensioners, and when there are heavy burdens on single women, married men and employers, especially when they have liquidity problems—we must not underestimate the difficulties of industry in the present economic circumstances—the Conservative Opposition tell that kind of tale to the House. I shall be amazed if they have the full support of their own party, let alone of the other parties in the House whose Members will be taking the trouble this evening to listen to the facts of the case.

Mr. Kenneth Clarke: The comparisons which the Minister has just drawn are entirely comparisons between what people will be paying and what they paid when paying Boyd-Carpenter contributions. It is no good attacking the level of the benefit under the Boyd-Carpenter scheme. They will not have the benefit. They were buying a commodity which will be taken away completely, so, needless to say, they will pay nothing in future for the Boyd-Carpenter sixpence, because that benefit has been withdrawn.
Will the Minister make the proper comparison, since his Bill is to amend the 1973 Act, between what people will pay under his Bill and what they would have paid under our legislation if it remained unamended? Will he not concede that there is this obvious difference, that the graduated contribution is being more than trebled for this category of women, and will he show where in the rest of the Bill any other category is treated in that way?

Mr. O'Malley: I can tell the hon. Gentleman straight away that if that graduated pension scheme were put on sale in any shop, the Department of Prices and Consumer Protection would quickly have to send its inspectors in. There was no real benefit. It was entirely derisory. But what will interest women is whether there is an increase or a decrease for them next April. I have demonstrated on the figures beyond peradventure, as the lawyers say, that there are substantial decreases for those women.
If the hon. Gentleman then says that that is all very well but the level of contribution which these women will be paying is higher than was assumed under the Social Security Act 1973, I take that


as a fair question and I answer it at once.
Everyone will be paying more under our proposals—[Interruption.] I shall deal with the matter if only the hon. Gentleman stops muttering and shaking his head. Everyone will be paying more under our proposals than under the Tory Social Security Act 1973. The reason is plain. On the actuary's advice which the then Conservative Government received, all that could be paid in retirement pension in real terms out of the money which came in under their contribution levels was £6·75. That in itself was inadequate then, and, what is more, one could not pay the £10 and £16 pensions from the level of contribution which the Tories set in their 1973 Act.
I do not for a moment hide that employed persons will be paying 5·5 per cent. instead of 5·25 per cent. I do not deny that employers with class 1 contributors will be paying 8·5 per cent. instead of 7·5 per cent. I do not attempt to hide that the women to whom we have referred will be paying 2 per cent. instead of 0·6 per cent.
I make no apology for it. We have to raise that kind of money in order to pay decent pensions. There might be a point in the argument if we were putting massive increases on the categories to which the hon. Gentleman refers, but, on the contrary, even at 2 per cent. they are to have substantial, and in some cases quite massive, reductions. I am sure that the Conservative Opposition are misjudging the mood of the country. This country is prepared to pay better pensions and to pay the contributions necessary to provide them.
Now, I come to the self-employed. As in the case of the married women who exercised the option, the Conservative Opposition complain that we are putting an unfair share of the necessary financial burden on many self-employed persons.
If it be true that we are putting an unfair share of the burden on these categories, it must follow that someone else is to have an unfair privilege. What should be realised is that from the 2 per cent. £47 million will come, and from the levels set for self-employed contributors £21 million is estimated to come in a full financial year. That is £68 million. If we drop that £68 million—

any hon. Member can look at the state of the National Insurance Fund—where do the Opposition propose that we should raise £68 million? Would they put up the level of employers' contributions from 8·5 per cent. to some higher figure? Do they suggest putting up the level for employees from 5·5 per cent. to some higher figure? Or do they want extra money from a Treasury supplement? They have always opposed an extra Treasury supplement. Let us work our way through the logic of the situation.

Mr. David Mitchell: I am grateful to the hon. Gentleman for giving way, because I am still probing for an answer to the question which I tried to put earlier and he has now come to the edge of it. He has given us the actual amount, the additional sum, which will be raised from the self-employed. What will be the additional sum raised in totality from employees?

Mr. O'Malley: The figures as I have them here are as follows; from employers £2,821 million; from employed earners, class 1 contributors, £1,748 million; and from the self-employed and voluntary contributors, £221 million.
Let us quickly look at the position of the self-employed. In this argument the first point to note is that the structure of self-employed contributions—that is, class 2 and class 4—was established by the Conservative Government, not by a Labour Government. Of course, if the Tories had been introducing 5 per cent. for class 4 contributors in April, there would have been some objection from people who do not like to pay any new kind of tax or contribution. But the formula which was set down in 1973 was based on current earning levels then. It was to charge the self-employed man on average earnings from Schedule D income something over 60 per cent. of class 1 contributions for comparable benefits. This ratio, subject to soundings and the need to move class 4 contributions in percentage figures, is roughly maintained in this Bill for that average income on Schedule D. There is virtually no change.
Just as he refused to defend his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) in the debate on Friday, the right hon. and learned Member for Surrey, East is now trying


to disown the very pension structure which was passed by his Government in 1973.
We are making no substantial change in the ratio envisaged as between self-employed and employed persons in the 1973 Act. What we say, however, is that we should assist the self-employed with lower income, which the Social Security Act did not.

Mr. R. A. McCrindle: The hon. Gentleman will agree that it is easy to mislead the House by citing pence per week up or down in one category and percentage increases or decreases in another. Will he do something for relatively simple people such as myself and compare in terms of pence per week what the self-employed on £62 and £69 a week will pay in the same way as he has done for employed persons?

Mr. O'Malley: Certainly. That is precisely what I shall do. The hon. Gentleman should know that, since I, too, am a simple man, I prefer to put such things in simple terms, just as he does.
When we put up the level of contributions from 5·25 per cent. to 5·5 per cent. and, in respect of employers, from 7·5 per cent to 8·5 per cent., it was necessary to maintain a balance in the ratio between the payments of one category, the self-employed, and the other category, employed persons. There were only two ways of doing it. We could have put the flat-rate contribution up to £2·70, which with the Treasury supplement would have raised about £25 million. But that contribution had already risen in August, and large numbers of self-employed people—between one-third and one-half I cannot be more precise—are in receipt of Schedule D incomes at or below £1,600 a year. The Government do not want to load on them an extra 29p a week.
We therefore looked for other ways of raising money and we used the formula of earnings relation. We therefore held the class 2 contribution at £2·41 whereas under the traditional formula it should have gone up to £2·70. I make no apologies for trying to help the lower-paid self-employed.
The Conservative Opposition spoke as though they would be uprating the figure

for class 1 contributions in the range between £1,150 and £2,500. That is not true. The Under-Secretary in the Tory Government said in Standing Committee in January 1973 that it was their intention that
the upper contribution limit in the new scheme should broadly correspond to 1½ times national average earnings."—[OFFICIAL, REPORT, Standing Committee E, 25th January 1973; c. 279.]
All we have done it to move the range in which class 4 contributions will be paid, as the former Under-Secretary intended, to between £1,600 and £3,600 in order to reflect the movement in wage levels since that time.
Would the Opposition instead put up the rate to £2·70? If they would, I understand their thinking, but I oppose them because I would not want to impose another 29p on the lower paid. Secondly, do they agree that the range has to be between £1,600 and £3,600?

Mr. Kenneth Clarke: The Minister slides magnificently, and he has not answered the question my hon. Friend put to him. It is not true that the Government have simply moved the band of incomes. They have raised the percentage from 5 per cent. to 8 per cent. If the Minister cannot answer my hon. Friend, will he accent that the difference is that self-employed contributors earning £3,600 a year will find that next April their weekly payment will rise by £3·08 overnight? That is the figure the Minister has not yet mentioned. As my hon. Friend said, he mentioned the figures and bands per week very readily in other categories. Will he get down now to the extra £3 a week that some of the self-employed will be paying?

Mr. O'Malley: Of course I will. We now have a common basis for discussing the subject. The Opposition agree that one of the options was to put the figure up from £2·41 to £2·70. Presumably they would have used that course and they would therefore have started at a £2·70 base in order to maintain the ratio in the 1973 Act. Secondly, we are agreed that the range of earnings on which class 4 contributions should be payable should be between £1,600 and £3,600 a year. The difference between the parties is therefore narrowed. We say that the figure should be £2·41 plus 8 per cent.
between £1,600 and £3,600. The Opposition say that it should be £2·70 plus 5 per cent. between £1,600 and £3,600.
Now I shall use the figures, because I have been waiting to do so. To use the Opposition formula would mean that self-employed persons with incomes of £11 a week—and there are some of those—would be paying 29p a week more than they will pay under our proposals. A self-employed person at £23 a week would be paying 29p a week more. It is not until we reach the case of someone earning £46 a week that there is a difference of 17p, and at the ceiling there is a difference of between 63p at £62 and 87p at £65. This is the great divide. That is the basis for voting against the Bill and for putting at risk the whole reintroduction of an earnings-related system.

Mr. McCrindle: I must press the Minister on one point. He makes great play of saying that there will be a reduction of 24p per week to the employed man on earnings of £62 a week. I ask him a straight question. How much more or less will the self-employed man on £62 a week be paying? If he can tell us that, we can then proceed on a basis of straight comparison.

Mr. O'Malley: That is precisely what I have been doing. We have agreed the basis of our discussion and I have shown what the difference is between us. We are re-introducing the class 4 system of contributions which the Conservatives introduced in legislation. It is their structure, and the difference between us ranges from 29p less to 87p more a week. That is what all the argument is about.
The remainder of the Bill is wholly beneficial. There is a clause enabling friendly societies to institute occupational pension schemes. The rest of the Bill is either technical or consolidating. My right hon. and hon. Friends and I are proud of our record and policies on pensions, and we reject those of the Conservative Opposition, who say that they are willing to have better pensions but when it comes to pasing legislation to enable them to do so funk it and try to make cheap political mileage out of the issue.

Mr. Deputy Speaker (Mr. George Thomas): I should have informed the House earlier that Mr. Speaker has selected the amendment standing in the

name of the Leader of the Opposition and his right hon. and hon. Friends.

6.16 p.m.

Sir Geoffrey Howe: In the light of that delightful news, Mr. Deputy Speaker, I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House, while welcoming the provision of improved social security benefits and recognising the need to meet their cost, declines to give a Second Reading to a Bill which seeks to impose an unfair share of the necessary financial burden upon many self-employed people and upon those married women and widows who have elected not to pay insurance contributions at the full rate.
I begin by expressing my astonishment at the venom with which the Minister of State has chosen to attack the amendment. It is the extent to which he has been driven into misrepresenting the essentials of the case which leads us to conclude that he is attempting to conceal his own sense of deep unease at what he is putting before the House.
I do not wish to speak at too great a length because the points, although of great importance, are simple ones. Our amendment embodies feelings which are strongly and deeply held inside and outside the House. I wish to make plain the basis of our opposition to the Second Reading of the Bill. The reasons were clearly foreshadowed from the Opposition Front Bench on the Second Reading of the Bill that was before the last Parliament. We are not opposed to improving social security benefits. We welcome that. We fully recognise that they have to be paid for, and we were delighted to hear the lucid way in which the Minister of State expounded the merits of the earnings-related contributions system for flat-rate pensions, to which, as a matter of principle, he was vigorously opposed not very long ago. It may be right to describe earnings-related contributions as closer to a social security tax, but even so it is a sensible system of paying for benefits which we entirely accept because we introduced it.
The Minister expounded with much pleasure the benefit to the lower-paid employed persons through the reductions in contributions involved. Of course, we agree with him because that is part of the concept we introduced.
However, we challenge the basis chosen by the Government in the Bill for distributing the total burden of paying for improved benefits. First we challenge it, as the Minister has anticipated, because of the very large absolute and substantial proportionate increase in the burden of contributions that will be borne from next April by upwards of 1 million self-employed people. That is not simply in our view without justification; it is so unjustified as to be harsh and vindictive. The burdens will fall on a huge range of people who are self-employed, from greengrocers to architects, from milk farmers to chemists and from barrow boys even to barristers.

Mr. Arthur Lewis: And Members of Parliament.

Sir G. Howe: The hon. Member for Newham, North-West (Mr. Lewis) has mentioned Members of Parliament. They are self-employed, but from next April they will be changed to employed, which is why I and, no doubt, the Minister have not declared an interest in the Bill.
The second reason we oppose it is that it imposes a burden on about 5 million married women and widows who have chosen to pay national insurance contributions, as they have been entitled so far to do, at the reduced rate. We are opposed to that because it represents a very large step towards the outright abolition of the married women's option. The Labour Party is committed to the abolition of the married woman's option, and we believe that is wrong, and that is why we are committed to opposing it.
The Minister did not make a fair comparison. The only fair comparison, in considering the position of married women next April, is between what they would have been paying under our legislation and what they will be paying under the Bill. On either basis the Boyd-Carpenter scheme is disappearing. There are sniggers from the Government Front Bench, but it should be recalled that the former hon. Member for Sowerby said that he wished that his party would stop discussing the Boyd-Carpenter scheme as a swindle. It was no such thing. It would have been replaced next April by our own second pension scheme, but as a result of the Government's actions it is

being replaced by nothing, and there will be a yawning gap.
Married women who have opted to pay the lower contributions will be paying three times as much as they would have been paying under our legislation. Even with all the sleight of hand that the Minister has it is impossible for him to disguise or conceal such an increase. It is impossible for him to suggest that that is fair compared with the increase in contributions by the ordinary category of employees from 5¼ per cent. to 5½ per cent—up by one-twentysecond. It is part of the Government's policy to abolish the married women's option and to treble the contribution from next April. Our concern about this is an important part of our amendment.
The Minister acted as though he was genuinely astonished and surprised—indeed, shocked—that our amendment should be before the House, but we made perfectly clear during the earlier Second Reading in the summer that we were to raise these matters in Committee. He had notice of these matters from the beginning of July. Since then he has had months, during the parliamentary recess, to contemplate these matters. The Bill proposed at that time lapsed and then the General Election arose. Throughout the General Election campaign, and in our manifesto, we repeated our contention that changes being proposed were unfair.
As news of the Government's intentions spread throughout the country storms of protest arose in all corners of the land. I assure the Minister that his legislation needed no misrepresentation by us to provoke the storm of protest. The proposed legislation seemed to cry out in such a way as to attract protesters. I have received hundreds of letters from colleagues, from individuals and from organisations representing the self-employed, and I refer the Minister as well to what the Press has said on the matter.
We hoped that the Government would have taken account of our objections we voiced in July and would have reconsidered their proposals. Imagine our surprise to see the Bill, which is generally good in its intention, reintroduced without any changes made on the points we raised. The Minister appears to speak with doom-laden surprise about our approach, and he seeks to blame us for


bringing the National Insurance Fund towards bankruptcy. He accuses us, with breathtaking absurdity, of irresponsibility.
People who are concerned about the state of the National Insurance Fund and about the prospect of higher pensions could be reassured if the Government were now to say, as they should do, that they recognise the importance of the points we have been making in recent months, and if they were to undertake to make a change in Committee. There would then be no trouble. If our amendment is carried tonight, as I hope it will be, and the Minister and the Government slink back into Alexander Fleming House, they could reintroduce the Bill next week. We would not object to that; we would facilitate it. It is sheer nonsense to place any responsibility for the situation on the Opposition. We are seeking to do our duty of raising important points on behalf of the citizens of this country.
Since the 1946 legislation self-employed people have always paid contributions to the National Insurance Fund, and this is in order, because they qualify for certain benefits. They have always paid at a lower rate than that of the combined employee-employer contributions, and that is equally in order, because they were never entitled from the outset to unemployment benefit or industrial injury benefit, nor, initially, did they get a full right to sickness benefit, although later there was a small change in that respect. The position relating to the self-employed has endured, with certain changes, until today.
The Social Security Act 1973 introduced a new principle of graduated contributions for flat-rate benefit up to a maximum of £2,500. It is right that that should apply also to the self-employed. The class 4 contribution was invented and there has been no argument about the principle involved. In every letter I have written and in every speech I have made on this matter I have accepted responsibility for the principle of graduated contributions.
However, there is a profound argument about the method by which, and the scale on which, the principle should be applied. We proposed a band of £1,150 to £2,500, at 5 per cent. from next April. There may be a case for some change in the band because of inflation, but there is no case for hiking up the percentage in

the way proposed. The Government are raising the band from £1,600 to £3,600—together with a change in the rate from 5 per cent. to 8 per cent.
In order to measure the impact of this we must bear in mind that the contribution is not tax deductible. The effect on, for instance, a person earning the maximum £3,600—

Mr. O'Malley: I am following the right hon. and learned Gentleman and I am grateful that he accepts that the Conservatives were responsible for the introduction of the class 4 contribution and the structure which is now under debate. Can I take it that he accepts, as did the previous Secretary of State and the previous Parliamentary Secretary, that the band of £1,150 to £2,500 was to be moved to take account of earnings, and that a new band would be justified?

Sir G. Howe: I do not accept the precise figures, because the Government have better access to figures than I have; but with proposals on so substantial a scale as those now being put forward we are all the more entitled, bearing in mind that we are in an inflationary period, to challenge an increase from 5 per cent. to 8 per cent.
Our proposals, in relation to a man earning the maximum on our original band, would have meant an extra £67, whereas on the elevated band which the Minister has suggested—I am not sure how the picture of an elevated band will be seen in the minds of people reading HANSARD—a man earning £3,600 a year will have to raise, as a lump sum, £160. He will have to raise it out of taxed income. Leaflets issued by the Department make clear that he will get no extra benefits at all. The effect of this—because the extra contribution is not tax deductible —is that the man will have to earn in cash an extra £238 to stand in the same place in cash terms; and this takes no account of inflation. There are similarly harsh burdens for those on lower incomes.
In reply to our criticism concerning the position of married women, in which we said that the situation would be different if they were to have a massave increase, the Minister said that they would not have to pay more but rather a little less, but in the case which I am now using as an example there is a massive increase of


£238, which will have to be paid by the self-employed in a lump sum. This is rightly seen to be an unjustifiable increase in what amounts to, in effect, a new extra tax.
No doubt our proposals would have aroused some unpopularity as they began to operate, but the position would not have been unreasonable. They would have operated at a lower level—I shall give details of that in a moment—and they would have operated under our Government, under which income tax and other taxes would not have been going up. Under this Government, income tax payable by these self-employed people has already gone up by 10 per cent. Who knows what the Chancellor of the Exchequer may have in store for us next week?
The burden on self-employed people is even greater because most of them carry on their businesses in premises rated as business premises. They have received no relief from the soaring burden of rates. Self-employed shopkeepers have seen the average rate per shop increase since 1956–57 by no less than 529 per cent. It is the piling of burden upon burden that we criticise—rising taxes and rates and then the unfair and unnecessary increase in this surcharge.
I have tried and totally failed to understand the reasoning behind the change the Minister of State has outlined. I invite the House to study the history. In 1946 the self-employed contribution was about 68 per cent. of the combined employer-employee contribution. By 1972 it fallen substantially, to about one-third. Our 1973 Act proposed raising it to about a half: 53 per cent. is the figure I have been given. The Bill goes almost all the way back to the 1946 relationship, practically to the two-thirds then operating.
That is felt to be wrong, for a number of reasons. First, since 1946 a whole range of new benefits has been introduced for employees, for which the self-employed are not eligible but for which they pay in their capacity as employers—graduated pensions, earnings-related supplement for unemployment, sickness and injury benefits and widows' allowance. Admittedly, the total cost of earnings-related supplement is not a large per

centage of the total burden on the National Insurance Fund, but it is something which the self-employed do not receive but for which they pay. They also pay as employers for the redundancy payments for which they do not qualify, on top of all the other rising contributions. As employers, they pay high and rising contributions for their own employees. Under the Bill, the self-employed person who employs other people will have his contribution towards their benefits raised from 7½ per cent. to 8½ per cent.
All this is happening at the same time as the self-employed see reductions in payments by their employees. The Minister was taking credit for that only a few minutes ago. He took credit for the fact that an employee earning £62 a week would be paying £13 a year less in contributions. Yet at the same time, perhaps even in the same shop, the self-employed man earning £62 a week will be having to pay about £120 extra a year. That is the real comparison—the increase in the burden on the self-employed contrasted with the position of the employed man. That is why it is idle for the Minister to speak about the need to spread the load on the working population as a whole. We do not challenge the need, but let us look at the way in which the load has been spread. Look at the unnecessary changes the Government have introduced.

Mr. O'Malley: The lines on which the right hon. and learned Gentleman's argument has developed suggest that he would have been in favour, and is in favour, of keeping the rate at 5 per cent. within the £1,600–£3,600 band. To maintain the ratio set down in the Social Security Act 1973 he would therefore be driven to put up the flat-rate contribution, the class 2 contribution, from £2·41 a week to £2·70. That would surely be hurtful to the substantial numbers of self-employed people with very low incomes. Is it not better to try to give some relief to the people at the bottom end of the self-employed category? Is it not much more equitable to try to spread the load among self-employed people with higher earnings, rather than impose a further burden of an extra 29p on those with low incomes?

Sir G. Howe: I am not running away from the question, but it is not for me to


be driven to accept this or that alternative thrown across the Floor by the Minister. I say that the alternative he has chosen is manifestly wrong and profoundly unfair, and that it is his business to take further advice from his Department and change the provision.
There is a variety of ways the Minister could have chosen. He could have increased the flat-rate contribution by a smaller amount, not going as far as the £2·70. He could have applied what his right hon. Friend foreshadowed, a larger increase in the contribution of employed people, which was to have been 8¾ per cent. but which has now come before the House as 8½ per cent. It would need the most modest increase on that much larger group of employed people to produce the £29 million we are talking about. To tilt the burden of helping the lower-paid self-employed wholly on to the higher-paid self-employed in this way has produced a result that is nonsense. It has justly earned the Government great unpopularity, and will continue to do so.
The comparison between the self-employed contribution and that of the employee-employer may not be the right one. The right comparison may well be between the burden on the employee and the burden on the self-employed person, because the combined contribution of employer and employee can to a large extent be directly added to the price charged by the employer. In practical terms, it can be counted as a cost of the business, whereas for the self-employed person there is no escaping the fact that this looks and feels more and more like what the right hon. Member for Down, South (Mr. Powell) referred to the other day as a tax. It is a tax.
In 1946 a self-employed person was paying about 1¼ times as much as the employed person. Now, even the basic figure of £2·41 is almost 100 per cent. of the amount paid by the employed person. Therefore, one does not need to raise the self-employed person's graduated contribution much more to put him back in the same relationship to the employed person as he was in 1946. The increases should certainly not have been made on this monstrous scale.
I should like to make one other comparison. As a result of the Bill the contribution to the National Insurance Fund by the employee increases by 36 per cent.

As a result of the Bill the employer's contribution rises by 34 per cent., but the self-employed person's total contribution rises by 100 per cent. That is a measure of the inequity and injustice.
The amount involved totals only about £29 million. It would be a small amount to raise in any one of several ways. The Government have chosen the worst, the most unfair and the most burdensome method possible. The small amount involved has produced the maximum sense of injustice. Giving the Government the benefit of some doubt, I can only conclude that they have acted in this way because they have wholly failed to appreciate what they have done. They have not appreciated, for example, the important rôle in our economy of small businesses, mainly run by self-employed people.

Mr. Edward Gardner: Will my right hon. and learned Friend keep well in mind that there is now in existence a pressure group, which started in my constituency, the National Federation of Self Employed? This group now has hundreds of members throughout the country, and they are very grateful to my right hon. and learned Friend for the support he has already given them.

Sir G. Howe: I have that organisation well in mind. I am grateful to my hon. and learned Friend for his intervention. It is interesting that as a direct result of what the Government have done this new organisation has sprung into existence. The Minister of State and his right hon. Friend the Secretary of State may find that they have almost inadvertently set in train a middle-class revolution, the first national wave of Poujadism, provoked almost unintentionally. The Minister has failed to appreciate the rôle played by self-employed people in our economy.
The Minister's proposal has been condemned by the Economist as a heavy swipe at the self-employed. The Daily Telegraph said that it:
typifies a growing tendency for governments to treat with respect only groups which have a corporate voice …
Hence the National Federation of Self-employed. The Times said:
There can be no justification for this inequity.
That is the view which I have put before the House. It is a view so clear


that one can only suspect that other motives exist on the part of the Government. They may be unconscious motives. It seems that they have a total lack of sympathy with and understanding of people who work for themselves. May be that leads them into a campaign against men and women who are sufficiently self-reliant and independent to be self-employed. It is possible that psychologically or in practice such people have no place in the Government's vision—Heaven help us—of a Socialist society. It is for that reason that we oppose this measure with such determination. We do so because in practical terms it represents an intolerable injustice upon two groups of people who are entitled to have us represent them in this House.

6.42 p.m.

Miss J. Maynard: I come to this House to represent Sheffield, Brightside. It is an industrial seat and part of the great industrial city of Sheffield. It is a city which has more women workers than any city in the country. Some of them are widows. The issue which has been raised with me more than any other is that working widows have their pensions tacked on to their earnings and are thereby heavily taxed. Many of them feel that they would be better off drawing social security benefit although they would rather work.
I come here not only to represent Brightside but as the only sponsored Member for farm workers. My background was entirely rural until I became the Member for Brightside. I am the daughter of a smallholder. As I come as a sponsored Member for farm workers, I speak for one of the lowest-paid groups. At the moment farm workers are on a basic rate of £25 a week. It would be a mistake to think that the only people who like in poverty are pensioners. Low-paid people, and particularly those with families, are often living in poverty.
Low pay in agriculture goes with the tied cottage system. I regret very much that its abolition was not stated in the Gracious Speech. I have tabled an early-day motion to that effect. The tied cottage system is an issue that is vital to farm workers.
Although I represent an industrial seat, I have the full backing and support of my constituency to put forward the farm

workers' case as an issue of vital importance. One reason for my having my constituency's unanimous backing is that my constituents understand the human problems brought by the tied cottage system in agriculture. The system means that a man's home is dependent upon his job. I believe that that is unacceptable. It would be unacceptable to me and I do not like to impose on others that which I consider unacceptable. Some people may be happy with the tied cottage system until they have a disagreement with their employer. They will then find that they can lose their job and the roof over their head. It means that if an agricultural worker has an accident and can no longer work, he will suffer the same fate. It means that those over 50 years of age are likely to be in trouble. It means that if a person is ill he has to struggle against his illness to avoid meeting the same fate. There cannot be a stronger sanction over anybody than the fear that the roof can be taken from over his head.
What is the end product of the situation? The result is that our people are often dragged through the courts despite the fact that they may have given years of honest work. None the less they are eventually dragged through the courts so that their employers may obtain possession of their homes. We can imagine what people feel in that situation. It costs my union £10,000 a year to defend those who go through the courts. We would rather put that money into the union's funds than into the lawyers' pockets. The present position is that 50 per cent. of farm workers live in tied cottages. As the number of farm workers has reduced, the percentage living in tied cottages has increased.
There is a connection between tied cottages and low pay in agriculture. It is clear that if the farmers were not able to offer the bait of a cheap house at the time of a housing shortage, they would have to pay the rate for the job. That is why the tied cottage issue is so important to farm workers. It is clear that it is closely related to low pay in agriculture. When people are consistently on low pay—and nobody has been on it more consistently than farm workers—they tend to lose their self-respect and self-confidence. This may be even worse than being on low pay.
The farmers were given security of tenure by the 1947 Act. If farmers are


entitled to security of tenure, the farm workers must have a similar entitlement. They help to produce 50 per cent. of Britain's food. In doing so they help to control our trade gap. I am sure we all appreciate that we can do with all the help we can receive in that direction.
The position today is that agriculture is in a mess. I believe that that is because of our unconditional entry into the Common Market. The farmers allowed the Tories to take us into the Market without a whimper. The stockmen are now crying about their difficulties but they were asking for the end price. Of course, they could never be sure that they would get it. Today we have high prices in the shops for beef but low prices for the farmers in the markets.
I have a long memory of agricultural matters and I remember that the end price was never any good in the long term. The farmers have burnt their fingers and they are now demanding a return to guaranteed price support. They want the end price when prices are crashing through the ceiling and they want guarantees when they are in difficulties. In other words, they want the best of both worlds.
Agriculture was never better than under the 1947 Act. It then had security and the opportunity to expand. However, even with those conditions the farm workers remained low paid. That is their position today. They are on a basic rate of £25 a week. Agriculture has a twentieth century approach when it is considering new techniques but an eighteenth century approach when it is considering wages. Part of its eighteenth century approach is the persistent fight which is put up to retain tied cottages and low pay. I say that tied cottages must go and that they will go when a Labour Government—I hope it is this one—have the political will to do away with them.

6.50 p.m.

Mr. Richard Wainwright (Come Valley): I have the pleasant duty of congratulating a fellow Yorkshire Member on a most lucid and compelling speech. I and, I am sure, the House were impressed by the remarkable merger of town and country which the hon. Member for Sheffield, Brightside (Miss Maynard) now symbolises and which She expressed

so eloquently. Although I am sure that the hon. Lady's views will not always pass without controversy, none can doubt the great sincerity of her concern about the low paid, on whose behalf she has put in such hard, practical work for so many years in North Yorkshire. I assure her that we share her concern about the low paid and, in particular, their plight during periods of rising prices. We all look forward to hearing many more contributions from her.
As always when national insurance is involved, we are treated by the Labour and Conservative Front Benches to an excursion into a fantasy world, a world which was once described by the right hon. Member for Leeds, North-East (Sir K. Joseph) as a vast rambling Gothic edifice. It is certainly a subject about which they are extraordinarily touchy. For example, there was the pained expression by the Minister of State in his suggestion that the Tory Opposition were jeopardising the whole of this magnificent Bill. That suggestion has already been shown to be nonsense. It has been shown that a better Bill could be facilitated through the House without serious delay.
Liberals are threatened with the story that we might bankrupt the National Insurance Fund, but we are quite unmoved by such a threat because the fund is, and has been for many years, nothing more than an elaborate myth in which, unfortunately, a large number of people have a vested interest. We believe that the whole system of contributions and actuarial reports, which is all a gigantic front and hoax, should be abolished and that we should have a straight social security tax to deal with the whole thing.
Another indication of rather strange thinking was the odd attitude shown by the Minister of State in the pained way he kept repeating that he had to maintain national insurance from a work force that was not growing, as though he were presiding—perhaps the Government expect soon to be presiding—over a primitive agrarian peasant economy in which one has to raise as many sons as possible in order to keep the primitive agriculture going.
The fact that our work force is not growing need not give us concern if only we can get the capital investment to put the horsepower behind it. We


could gain an enormous increase in production, together with the valuable exports that would go with it, if we could give our static work force more power to its elbow.
The presentation of many aspects of the Bill has been given an atmosphere of certainty which is not justified by the facts. Leaflets have been put out to the public saying that the purpose of these contributions is to ensure that certain classes will make a fair contribution. But one only has to turn to the admittedly slender reports of the Government Actuary to find that he makes it clear that there is no certainty behind many of these suppositions. We agree with the comments made by Conservative Members about the unfair treatment of certain women workers in the Bill, and I do not need to repeat the cogent arguments advanced on that score. But on the situation of the self-employed under the Bill I want to emphasise the very slender basis of the calculations in the Bill.
The Government Actuary, in his 1972–73 report on the Social Security Act introduced by the Conservatives said with regard to class 4 contributions that
… the estimate for the yield of these contributions is tentative; it seems likely that about one million persons will be liable to pay them.
No one could claim that to be a very clear or firm statistical basis for justifying any particular level of contribution. In his report on this Bill, the Government Actuary makes it plain that there has been no important change in any of the assumptions he adopted last time.
The Government ought, first, to be a great deal humbler than they have been in recognising that the statistical basis about the self-employed is shaky and, secondly, should adopt the usual British maxim that the subject should be given the benefit of the doubt.
The burden on the self-employed should be kept within bounds at least until experience of the working of the legislation has shown exactly what people are paying in relation to the cost of their benefits. At the moment, everything is shadowy and it is misleading of the Government to indicate that there

is some very firm basis for all their calculations.
It is clear, however, that compared with the Conservative Act of 1973 the percentage increase in the Bill in relation to the self-employed is almost twice as much as the percentage increase in relation to class 1 contributions. That can be ascertained by a simple correlation of the Government Actuary's report of 1972–73 and his report on this Bill. We should hear much more from the Government by way of an attempted justification of this very much greater increase.
I come now to the overwhelming reason which will lead the Liberal Party to support the Conservative amendment. We believe it entirely wrong that, in this time of inflation, which is not recognised by our tax system, unfortunately, contributions should be based on profits assessed for income tax. It is common parlance that today the tax system trips up gravely in not taking into account the facts of life with regard to inflation. This matter is being widely canvassed in relation to income tax and corporation tax, but the consideration is equally important in relation to the social security contributions of the self-employed, which are to be specifically based on their profits as alleged for the purpose of Schedule D income tax. It is part of our case that profits assessed for this purpose are not really profits but simply the results of inflation, which cripple the trader rather than improve his position.
It is important that the House should recognise this factor because much of the discussion about the unfairness of our tax system in a time of very rapid inflation has centred round corporation tax. Some bodies, especially the CBI, have given the impression—I hope unwittingly —that the only traders adversely affected by inflation are those trading as limited companies.
As the accountancy bodies of the United Kingdom have just pointed out in a letter to the Prime Minister,
the serious cash flow problems of the British economy…affect smaller businesses, sole traders and partnerships no less acutely than larger industrial concerns.
If the House is so misguided as to accept the figure of 8 per cent. of profits as assessed for income tax as a levy on the


self-employed, we shall run the risk of driving out of business—not merely causing them hardship—the invaluable joiner around the corner, the self-employed plumber for whom we all send when there is a disaster in the home at eight o'clock on Sunday night, the window-cleaner and all those others who rally round at times and seasons when the nationalised bodies do not want to listen to the householder and when all one can get from any of the large concerns is a recording machine saying at the other end of the telephone that the matter will be read over on the machine some time on Monday morning. The danger of the change in class 4 contributions is not only that there will be hardship to the self-employed, which is serious enough in itself, but that there will be great loss to the rest of the community who depend so largely on the initiative, enterprise and willingness to work of self-employed people.
I should also like to stress that, as with all bad law, there will be found ways round some of this iniquitous burden. It is a maxim that over-taxation always produces avoidance, perfectly lawful avoidance, but it consumes a great deal of time and ingenuity that would be better directed towards improving the balance of payments. If, as I hope will not be the case, the Bill is passed as it stands, there is no doubt that many self-employed people will spend valuable hours arranging to employ their wives and making other artificial but perfectly legal arrangements to avoid a burden that is obviously and manifestly unfair.
In view of the unfair treatment that the Bill metes out to certain classes of women and to at least half, if not more, of the self-employed population, we on the Liberal Bench intend to vote for the amendment tonight.

7.3 p.m.

Mrs. Margaret Bain: I understand that it is the tradition of the House in one's maiden speech to pay tribute to one's predecessor. It is no onerous task for me to pay tribute to Barry Henderson. As hon. Members are aware, East Dunbartonshire is a new constituency whose boundaries were redrawn for the election in February of this year. Barry Henderson was its Member for seven months, and the slim-

ness of my majority at an election which saw the virtual collapse of the Conservative Party in Scotland is a tribute to the respect that he won.
To represent East Dunbartonshire is to represent a microcosm of Scotland. There are three major burghs within the constituency—Cumbernauld, our space age new town, Kirkintilloch, an older Glasgow overspill burgh, and Bearsden, which is sometimes called the millionaire suburb of Glasgow, although I am sure that the residents of Bearsden do not find that an appropriate title. There are also two mining villages, Croy and Twechar, each with a highly individualistic sense of community, and within the landward area there are farms, smallholdings and so on. As you can see, Mr. Deputy Speaker, it is not easy to categorise East Dunbartonshire.
For me it is a great privilege to represent East Dunbartonshire, since this is the first seat that my party has won in West Central Scotland in a General Election. I trust that my association with the constituency will be a long one, despite the recent attempts by the Labour and Conservative Parties in unholy alliance to unseat me.
I wish to refer to some problems that are confronting my constituency. The subject of this debate is an issue that has caused many constituents to write to me. Many of the self-employed people who are to be subjected to this extra 8 per cent. contribution are not in the superrich category but are small business people, including, for example, local shopkeepers and window cleaners, painters and decorators, and smallholders, and, in older parts of Scotland, those symbolised by the crofters and Harris Tweed weavers. These people serve a vital function in our daily lives, and they are already subject to extreme pressure from the inflationary spiral in our economy. They are now expected to pay an earnings-related contribution over and above the flat-rate contribution, and yet at the end of the day they are to receive no extra benefit.
This is hardly the type of social justice that I should have expected the Labour Government to introduce. It is a discriminatory tax on the self-employed, who are being asked to pay a standard tax rate of 41p in the pound as opposed


to the general 33p in the pound. Given that the Government have already done nothing to relieve the pressure arising from the continuance of VAT exemption levels at only £5,000 annual turnover, at a time of rapidly rising inflation it is extremely difficult for them to make ends meet.
The second major problem currently affecting my constituency is that of education. Since last Wednesday I have been inundated by petitions, telegrams and letters from headmasters, teachers, parents and pupils in the constituency and, indeed, throughout Scotland. Teachers' salaries have fallen so far behind that only an increase of 35 to 40 per cent. will bring them into line with comparable sections of the community.
I wish here to refer to a letter that I received today from the head teacher of Kirkintilloch High School. He mentions the salaries that teachers take home. A principal teacher, a graduate with four year's completed service, takes home £152 per month. An assistant teacher, a graduate BSc, in the first year of service takes home £105 per month. The head teacher's letter says:
''When it is realised that some 'months' are of 5 weeks' duration then it must be realised that many teachers are not able to keep up the standards necessary to set a good 'tone' to the school nor in the manner which a profession requires. In fact many can barely supply the basic requirements of their family.
In fact, many young teachers are on family income supplement despite years of specialist training.
The actions of the Secretary of State for Scotland last week were a slap in the face for a hard-working dedicated group of people, and, were this not an uncontroversial maiden speech, I would call for the right hon. Gentleman's resignation, confident in the knowledge of the almost complete backing of the teaching profession in Scotland. Since I left my blackboard behind only some two months ago, I suggest that the Secretary of State for Scotland takes a year's sabbatical from politics and returns to teaching. I am sure that he would come back to the House and demand an immedate substantial increase for teachers
I warn the House that the sense of outrage and anger felt among Scottish teachers at the moment is of a proportion

never before witnessed and that their long-standing patience is totally exhausted. I would urge the Secretary of State to reconsider his refusal to grant an immediate interim award and to press for the immediate implementation of the Houghton Report.
The teachers in Scotland are not prepared to wait until December or February for their wage increase. Any nation that neglects the education of the future generation, that ignores the education of its children, is laying up great problems for itself, and unless we now give our teachers in Scotland a decent standard of salary, recruiting to Scottish training colleges will be at an even lower ebb than ever before.

7.9 p.m.

Mr. William Hamilton: It is a privilege for me to be the one to congratulate the hon. Lady the Member for Dunbartonshire, East (Mrs. Bain) on her maiden speech. It is a pity that more of her party colleagues were not here to listen to her—I count three out of the 11—for they missed a rare treat highly charged with non-controversial subjects.

Mr. Hamish Watt: Would the hon. Gentleman give way?

Mr. Hamilton: No. I do not know whether the hon. Gentleman has made his maiden speech, but he is not making it in the middle of mine.
We shall be glad to hear the hon. Lady again, but I must tell her that we need no lessons from her or her party about our concern for the teachers. Nor does my right hon. Friend the Secretary of State for Scotland.
The various parties have shown a belated interest in teachers and nurses. I remember campaigning on platforms for the nurses, demanding an interim payment pending publication of the Halsbury Report. I put a motion on the Order Paper. It was signed only by Labour Members. However, I let that pass. I do not want to disturb the harmonious relations now established between the hon. Lady and myself. I hope that we shall hear from her again, though not too often and not too long, because I guess that her time in this House will be a bit longer than that of her predecessor. This Parliament will last four or five years, and, short of a serious accident, which I


hope that she will avoid, she will be here. I hope that she will make the best of it while she is here, and I hope that we shall hear from her on controversial subjects concerning not only Scotland. She must get out of her parochial parish for a while. She has to accept bad English money for her salary whether she likes it or not, and I hope for her sake that some of the small business people about whom she is concerned are not English or other foreigners, because her party is committed to getting them out.
However, I leave that and come directly to the Bill. The House is concerned to discuss the merits of the Bill and is very tolerant to maiden speakers who stray from the fairly narrow debate that we are having at the moment.
Listening to my hon. Friend the Minister of State and to the right hon. and learned Member for Surrey, East (Sir G. Howe), I felt that I had heard it all before in rather better weather than we are having at the moment. I heard it last July, to be precise. At that time the House agreed that very substantial increases in social security benefits were desirable and necessary. We all agreed on that proposition. Indeed, there were suggestions from Liberal Members and others that not enough was being done. The Liberal who represented Hazel Grove in the last Parliament and who, unfortunately, lost his seat—we are all sad that he is no longer with us—suggested a substantial increase in the death grant. So there is no argument about the desirability of having increased benefits. Indeed, the time has come when we might consider the possibility of threshold agreements for pensioners in the same way as we agreed to them for organised workers in powerful unions. But, having decided to pay these increases to pensioners, to the unemployed and to everyone else who is in receipt of social security payments, we have now to face footing of the bill.
The Conservative Opposition have made great play with the problems which the Government have posed and which they would have posed about the self-employed. Up to now the self-employed have paid a flat-rate contribution only, and even when the Conservative Government introduced their graduated contribution scheme in 1961, the self-employed were left out and continued to pay the

flat-rate contribution. The cost of paying the additional benefits which were handed out between the inauguration of that scheme in 1961 and 1973 was placed largely on the shoulders of those unfortunate enough to be caught within the net of the graduated pension scheme. In fact, that was the clear purpose of the graduated scheme. The idea was that social security benefits could be increased, and the graduated element was increased to pay for them. That was the main purpose of the exercise.
In that period the self-employed received the same benefits as the rest except for the exclusion about which we know concerning unemployment benefit, industrial injuries benefit, and so on, because they have not by definition an employer contributory element.
Looking back to the origins of all this, the Beveridge Report of 1942, the principle was expressed and accepted that there would be flat-rate contributions for flat-rate benefits. The Labour Government which subsequently put the Beveridge Report into effect accepted that basic principle, and it was agreed that to qualify for all benefits the self-employed contribution should be not 90 per cent., which was the actuarial figure, but 70 per cent. The actuary said that, in order to get equivalent benefits to those of the ordinary worker, the self-employed person would have to pay 90 per cent. of the combined contribution of employer and employee. But the Labour Government of the day said that it should be 70 per cent. and that the self-employed would be excluded from the benefits which I have described.
That lasted until the Boyd-Carpenter scheme was introduced in 1961. By the early 1970s the contribution of the self-employed had dropped to about 40 per cent. of the employer-employee contribution as against the 70 per cent. introduced by the Labour Government back in 1946.
The 1973 Act sought to include the self-employed in the scheme of earnings-related contributions like the rest of the working people. However, before discussing the consequences of that, I must point out that one consequence of the proportionate reduction in the self-employed person's contribution was the burgeoning of phony self-employed, notably in the building industry with "lump" labour.
I have obtained some figures from the Library showing the extent to which, partly due to "the lump" but also in other occupations—and I do not exclude Members of Parliament from this—the self-employed enjoy considerable advantages which are not available to ordinary workers.
It is many years since my right hon. Friend Douglas Houghton said that there were two classes of taxpayer—"Pay as you earn" and "Pay as you like". That is largely true, and some of the people who are "Pay as you like" are the self-employed. We must not forget that in the context of this debate.
I have before me some figures of the Inland Revenue from 1966 to 1969—the latest date for which figures are available. According to the returns under Schedule A, more than nine out of 10 self-employed people are living on less than £2,000 a year. We know that a lot of them can declare virtually what income they can think of and that they can get away with all kinds of expenses which are not available to ordinary working people. I am no enemy of the self-employed. I agree with the hon. Member for Colne Valley (Mr. Wainwright) that the self-employed plumber, the small tradesman and the shopkeeper perform an invaluable service. It is a great tragedy that inflation is eroding their prospects and endangering their future. The growth of multinational companies and of bigger and bigger units is not necessarily good for the community. I would deny that the Government in this or in any other Bill or in the Budget next week are trying to get at the small man. The greatest enemy of the small man is not the Government but inflation, under whatever party might be in power.
I come now to the 1973 Act. The then Conservative Government sought to include the self-employed in the scheme of earnings-related contributions just like the rest of our workers. Their proposition was that the self-employed would pay at the rate of 5 per cent. on gains or profits in the bracket £1,150 to £2,500 to be effective from next April. That was accepted in principle by the then Labour Opposition.
Subsequent large increases in benefits had, and have, to be paid for by all. Let

us consider some of the figures proposed by the then Conservative Government. They proposed that the self-employed would pay a flat-rate class 2 contribution of £1·99 and the class 4 contribution of 5 per cent. The band of income on which it would be paid—the Government emphasised this and the Act made provision for it—was purely illustrative of the principle that in future the self-employed should pay earnings-related contributions. The Act imposed a duty on the Government to review that banding in the light of increased earnings. That is precisely what this Bill is doing. That banding was related to earnings in 1971. Clearly, this is an updating. I do not know whether it is accurate, but I accept that the Government have taken account of increased earnings during the last three years or so. Therefore, the rate has gone up from 5 per cent. to 8 per cent.
Alternative ways of financing increases in social security benefits have been, and no doubt will be, argued across the Floor of the House. One way is to increase flat-rate contributions from £2·41 to £2·71. That is a substantial increase to ask of any worker on £30 a week. Nobody would pretend that such a man was wealthy. Clearly, that would hit hardest at the lowest-paid self-employed person. It would also have been the second large increase in flat-rate contributions since the 42p increase of August 1974. That would have meant a total increase from £1·99 to £2·70 over that period.
Another alternative would be an increased percentage on earnings above about £30 a week and below about £70 a week, which would ensure that the greatest burden fell on the broadest backs. But it still means that the poorest of the self-employed will pay a higher proportion of their net earnings in contributions than the better off. This is a valid criticism. A self-employed man with earnings of £25 a week will pay 9½ per cent. of his earnings. A self-employed man earning £50 or more a week will pay 8 per cent. of his earnings. I suppose that it can be argued that the self-employed are gravely disadvantaged by this situation.
I think that all hon. Members have had the document from the National Federation of Self Employed. It talks about representing 2 million plus. I doubt


whether it represents 2 million. It is a pressure group. These people are perfectly entitled to organise themselves like this, but I think that one must take their proposals as a kind of special pleading, as is pleading by all pressure groups, and regard their case with a little scepticism. The federation is entitled to put forward its argument, but we are entitled to attach our own worth to it.
I do not believe that the Government are discriminating unduly against the self-employed. Indeed, the facts show that their benefits are subsidised from the contributions of other workers. To pay fully for their benefit entitlements would mean a contribution of 90 per cent. of the combined employer-employee contribution. Even after the proposed increases the self-employed will still be paying only 65 per cent. of that combined contribution, which is more or less in line with what the Labour Government originally proposed in 1946.
Moreover, the worker on the shop floor, who is paying his contributions on gross earnings, gets no relief for his employee contribution, whereas the self-employed man will pay his class 4 contribution on his profits or gains assessed under Schedule D, for which he is allowed to claim generous expenses and allowances by the Inland Revenue. In addition, when the worker pays his contribution he pays it on current earnings, whereas the self-employed is paying a year later when the value of money is that much less in an inflationary situation. Therefore, there is some advantage in delaying his payments for a year in the highly inflationary situation with which we are faced.
Finally, I should like to refer to the married woman. I have reservations about the removal of the option for the married woman. On the other hand, we have stated in the Queen's Speech—the Conservative Party is also on record in this respect—that we want to treat women in all circumstances on an equal footing with men. If we accept that principle we must accept it right across the board with no exceptions. That is why the Government are saying that a woman who is working will pay the full contributions and get the full benefits in her own right and not have to rely on her husband's contributions.
I realise that there are arguments the other way. Indeed, some were adduced

way back at great length and with much venom, as usual, by the hon. Member for Lancaster (Mrs. Kellett-Bowman). But the principle is sound. If women want equality, for God's sake let us give it to them and not squeal when they get it.

7.28 p.m.

Mr. David Mitchell: I should like to join the hon. Member for Fife, Central (Mr. Hamilton) in congratulating the hon. Member for Dunbartonshire, East (Mrs. Bain) on making her maiden speech and whose vividly descriptive tour of her constituency brought it to life for many of us. The hon. Lady covered the problems of teachers in Scotland in a clear and emphatic way. I think that there will be a wide welcome for her non-controversial call for the resignation of the Secretary of State for Scotland. I am sure that hon. Members on both sides will look forward to hearing the hon. Lady in future debates.
I shall not follow the hon. Member for Fife, Central in his gratuitously divisive remarks about pay-as-you-earn and pay-as-you-like. Our tax system provides not only for the highest level of taxation in Europe but for a higher level of payment of taxes. It does not have the massive loopholes which in some countries —for example, France—operate within the tax system. The hon. Gentleman's remarks were not only gratuitously divisive but inaccurate.
The Bill provides for substantial increases in national insurance contributions but not equally from every group of contributors. Married women have been picked out to pay a large proportion of the total increases, and the self-employed have been particularly picked out. My right hon. and hon. Friends have dealt with the question of the unfairness of the Government's proposals as between one contributor and another. I should like to say a few words about the impact which the Bill will have on the self-employed.
I was glad that the House was honoured with a brief visit by the Minister responsible for small businesses. I am sorry that he has not been able to remain with us, but in view of the pressing problems facing the small business sector he is no doubt properly occupied in defending small business interests


elsewhere. His presence today has stressed the great importance of the Bill to small businesses. If the small businesses are the seed corn from which grow the great industrial giants, the self-employed are the germ within that corn, because it is they who start the businesses which go on to become small limited companies and then become the great companies of this country.
A remarkable range of self-employed people will be clobbered by massive increases in their national insurance contributions from next April—from the publican to the man who cuts and supplies firewood, the blacksmith, the plumber, the window cleaner, the nurseryman, the smallholder, the jobbing builder and the dairyman. On a higher plane, according to one's taste, there are such people as barristers and solicitors. I am not sure about doctors, but certainly consultants will be affected. I had better declare an interest here because, like many other Members I share a secretary and such secretaries are self-employed. They, too, will be clobbered. Hairdressers, shopkeepers and restaurateurs will be caught by the Bill.
What is more important, the Bill will have an effect on people who are thinking of starting businesses of their own. The country benefits enormously from such people, for it is they who invariably bring forward new ideas, who innovate and whose inventions become practical, marketed propositions. Small businesses and self-employed people are the leading exponents of invention and they make a considerable contribution to our economy. They are among the most energetic and enterprising people in the community.
When such people are clobbered by the Government, as they will be next April, it is no surprise that there should be an increase in the queue of people who wish to emigrate to other countries where they can enjoy greater opportunities with less taxation and where less of the rewards of their hard work and effort is taken from them. We need to keep such people in this country for the contribution they make to our economy.
Above all, in an economy in which the cost of living is increasing so fast, the part Which small business men play in competition is of unique importance. Together with a number of my hon. Friends, I

believe that a dose of competition has more effect on the cost of living and on prices in the shops than has any amount of contracts or Government legislation, The deliberate way in which the Government have chosen to pick on the small shopkeeper, who is one of the worst affected by their proposition, is very sad. It will be more than sad for many customers, because there will be an increase in the number of small shop closures, leaving them with less choice. Inevitably people living in the country areas of, say, Hampshire, will have to travel longer distances to supermarkets.
Three results will follow from the proposition in the Bill. First it will reduce the standard of living of small businessmen who will have to pay considerably more in contributions. How much more is astonishing. Under the Conservative legislation a man on £2,500, instead of paying £2.98, will have to pay £3·79—and that is not deductible for tax. For the man on £3,600 the amount will go up to no less than £5.49, an increase of £160 per annum over what it would have been. Those are substantial increases and, since they will not be allowed for tax, substantial additional sums will have to be earned by such people.
Secondly, the cost will in part be passed on to customers. That will increase the prices which must be paid ill the shops. A wife who has her hair done for the weekend will find that the cost has increased, because the hairdresser will have to recover the money.
Perhaps more important than either of those matters is the effect that the Bill will have in making it less easy for people to start a business. It will deter people from starting businesses and in that respect the Government will damage the prospects of industry, because an attack on small businesses is an attack on Britain's future.

7.38 p.m.

Mr. Arthur Lewis: I had not intended to take part in this debate until I heard the remarks of the right hon. and learned Member for Surrey, East (Sir G. Howe). I was fascinated to listen to the Minister of State and the right hon. and learned Gentleman arguing about the relative costs of the Bill and the pros and cons of whether the self-employed would be


worse or better off. It is a pity that we cannot get, and have never been able to get, some agreement between Governments and Oppositions on facts and figures. I should like to be able to get from the Departments concerned factual information which is indisputable. Although I am partial towards and biased in favour of the Minister of State, I must say that I thought that the right hon. and learned Member for Surrey, East, probably because he is a lawyer, won the argument.
My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) said that Members of Parliament would be affected by the Bill. Had he been present earlier, he would have heard me intervene in the speech of the right hon. and learned Member for Surrey, East and say that Members of Parliament would be adversely affected by it. I pay tribute to the right hon. and learned Gentleman; he corrected me and said that, as from April, we shall cease to be self-employed. He has kindly loaned me his brief—the first time that I have been able to read from a Tory brief—which says:
MPs for National Insurance purposes have up to now been regarded as self-employed, but their position has been rather an anomalous one. A written answer [6th April 1971, c. 93.]"—
you will not be surprised, Mr. Deputy Speaker, to learn that it was to a question by me—
stated: 'Although Members of Parliament pay National Insurance contributions under Class II, for tax purposes they are not self-employed but assessable under Schedule E as holding an office'.". 
In other words, we pay self-employed national insurance contributions but are taxed under PAYE.
I have never understood this system. I thought that a self-employed person was one who could sack himself and was not therefore, liable to be sacked by someone else. Members of Parliaments have always been sackable, and not by just one employer; I, for instance, have 65,000 employers. They have never sacked me, and I do not suppose they will, but there are other hon. Members who will be sacked by their electorate.
So this is an anomaly. Members of Parliament are classified as self-employed for national insurance purposes, pay tax under PAYE as non-self-employed and

are liable to be sacked at any time, at the whim of the Prime Minister if he calls an election but ultimately by the electorate.
In December 1971 the Boyle Committee, reporting on the pay of Members, said:
…the position of Members under the National Insurance Act should be re-examined. We recognise that, given the present limited structure of classes of insured persons under the Act, there might be difficulties in attempting to transfer Members to the 'employed' class. The opportunity for a solution may, however, lie in the restructuring of the National Insurance Scheme, which will be required under the new Government pension policy. This is intended to take into account the situations of groups, like Members of Parliament, who are self-employed for national insurance purposes but who are assessed for income tax under Schedule E (covering incomes from offices and employment). For Members of Parliament we suggest that provision might be made for the payment of the necessary 'employers contributions' from the Exchequer via the House of Commons Vote". 
Later, another Written Answer, on 17th May 1972, said that the results of the Boyle Committee's review, which affected not only Members, would be in the Social Security Act 1973. It went on to say that there were others who would be included in that.
I must here declare an interest in two ways. First, I am affected like all hon. Members in that from next April we shall cease to be self-employed for national insurance purposes. Second, I have an association with commercial travellers. Will the reclassification of certain self-employed people for national insurance purposes affect commercial travellers? They are not strictly "employed". They employ themselves by taking on a commission or an agency, and they can decide whether or not to throw it up. But in another way they are like us. If their agent or company does not want them, they can be sacked.
If we are to get the benefit of this provision to what extent will other categories of "quasi-self-employed" be affected? This could apply also to a doctor who employed his wife as a receptionist-secretary. The hon. Member for Basingstoke (Mr. Mitchell)—I am sorry he has left the Chamber; Members normally wait to hear the next speech —mentioned MPs' secretaries. Is a Member's secretary self-employed? If a Member and his secretary fall out, the


Member can dismiss the secretary or the secretary can ask for her cards.
I am glad that an obvious anomaly relating to Members is to be put right—that is long overdue—but this treatment should be extended to others in a similar category.

Rev. Ian Paisley: Is the hon. Gentleman aware that ministers of religion are also classified as self-employed, yet they pay PAYE?

Mr. Lewis: I am obliged to the hon. Gentleman. I was going to say that I could keep the House here for the next hour, which would not be very popular, giving dozens of such examples, including doctors, surgeons, clergymen, dentists, journalists, judges and insurance agents.
This proposal will mean—I am now batting against my own side—that the only class affected will be the small businessman and shopkeeper. All the rest can find loopholes. Lawyers can.

Mr. Walter Clegg: indicated dissent.

Mr. Lewis: The hon. Gentleman shakes his head. I have not got the point over to him. If the Bill can exclude an MP, why should it not apply to a solicitor? He is technically self-employed for national insurance purposes. He pays income tax on a similar basis.

Mr. Clegg: A partner in a firm of solicitors is not taxed under PAYE. He pays his tax at the end of the year.

Mr. Lewis: I agree; the hon. Gentleman has not followed my point. I was about to say that MPs are the only class under Schedule E who pays PAYE. An MP is one of the very few who, although classified as self-employed for national insurance, pay PAYE. Yet he is liable to be dismissed at any time when the Prime Minister decides to go to the country. But some solicitors would be paving, although perhaps not all. I hope, therefore, that if we are to have this anomaly rectified, others in a like position will be treated on a similar basis.
I could quote dozens of examples, but my main concern is the question of commercial travellers. They are finding matters very difficult. I must not bring

the Chair into the debate, but I know that there is someone in the Chamber at present who knows very well the difficulties of commercial travellers in this matter. They have all the problems of the high petrol tax, of parking and of carrying their goods around and not being able to reach certain shops because that is prohibited on certain days, and so on. If in addition to that they find themselves having to pay this excessive increase in contributions, they will start to appeal to Members of Parliament saying that they ought to be exempted. They will say "You have exempted yourselves, and we are in a similar situation." All Members of Parliament will have difficulty in explaining to such people that they should pay the higher rate when we, as Members of Parliament, are exempted.
I hope that the Minister, perhaps later, will look into all the classifications and write to me or deal with the matter in Committee.

7.52 p.m.

Mr. James Kilfedder: As I do not belong to either of the two major political parties, I do not have to fight the General Election all over again in this debate. I appreciate what was said by the hon. Member for Newham, North-West (Mr. Lewis). We witnessed the scene of the two Front Bench speakers arguing between themselves. I agree with the hon. Gentleman that it is a pity that we cannot find some way in which figures could be agreed upon. However, it has always been known that satistics can be used on both sides of an argument and that they are very unreliable unless one has all of them.
I have listened with respect to the Front Bench speakers and to other hon. Members, including our two new very eloquent lady Members. In due course I shall go into the Division Lobby to vote for the amendment. I do not know what my colleagues from Northern Ireland will do but, although there are merits in the Bill, I cannot support the Government for reasons to which I shall refer briefly. I shall support the Conservative Opposition's amendment.
However, I am glad that at last we are to ease the earnings rule for retirement pensioners. We have all heard the financial arguments for not doing this. They have been repeated year after year. I listened to the Minister's explanation of


the position. The Explanatory and Financial Memorandum tells us that the cost of this will be about £5½ million next year.
When I consider the number of people who are over retirement age and eager to work, or eager to work for longer hours and earn more, I wonder whether the gain to the country will not outweigh the cost to the National Insurance Fund. So many retired people have industrial knowledge and skills which are in demand that it must be to the advantage of most urban and rural communities to see more of them in part-time or full-time work, quite apart from the great benefit which would be conferred upon such retired persons. So often they are prevented from playing a larger part in the economic and social life of the community because of the very tight earnings rule.
The arrangements for checking earnings are unsatisfactory. Honest pensioners who readily declare their earnings are penalised. Those whose earnings vary from week to week often have their pension books withdrawn for weeks on end until their actual earnings have been ascertained by officials in the local office. For many retired people, the pension book is the most important document that they possess. It is pathetic to see the effect on some pensioners of having their pension book taken away. I feel very strongly about this matter. To them, it is like taking away their sole means of livelihood.
Elderly constituents have come to me with this problem. This Ministry, this foreign alien Department to them—because they cannot get to grips with it —has taken away their book and they cannot get their benefits. I hope that the Minister will deal with that point. That is what many pensioners feel. Some do not understand why the book has been taken away. They do not understand the delay. Often the delay is unjustified. Some of them get frightened—I use that word deliberately—when the pension book is not returned to them by the next pension day. Sometimes it is not returned for weeks on end. That does not happen in every case but it happens often enough to worry me. It ought to worry the Government. I am sure that the Minister will share my concern about this matter.
Where this does happen, the effect on the elderly person is as though a curtain has been lowered and all is darkness and despair. He does not know where to turn. He has no money. We know how difficult it is today to survive. I know people who cannot obtain sugar in some shops because they have to buy a large amount of groceries in order to be allowed to buy it. Our elderly people need to be looked after in a better fashion than they have been in the past. I hope that the Secretary of State will look into this matter and see what can be done in the local offices to improve the situation.
As a Northern Ireland Member, I want to draw attention particularly to the class 2 and the new class 4 contributor. In Ulster we have 38,000 farmers, most of whom farm less than 60 acres. I am not talking of farmers such as those in England with their broad acreages, but of small farmers who will be adversely affected by these increased contributions.
There are thousands of shopkeepers throughout the Province, many of whom are in a relatively small way of business, and they will be hurt badly by these new rates. Many other people fall into the same category of the self-employed, such as handymen, some fishermen and builders. They will now be forced to bear this additional burden. There are many others who are self-employed. I shall not rehearse all the categories which have been mentioned so far, but they are all affected. For years many of these people have experienced difficulty in paying for the old class 2 or self-employed stamp. Those who are required to purchase the class 4 stamp under this Bill will have to pay 8 per cent. of their income from between £1,600 and £3,600 a year. This is a monstrous imposition. No doubt it is easy enough for most employed persons, including company directors who have thriving businesses to pay for their stamps, but it is difficult for self-employed people.
I was glad to hear the maiden speech of the hon. Lady the Member for Sheffield, Brightside (Miss Maynard), who spoke eloquently, as one would expect of the daughter of a smallholder. As the son of a small farmer, I have particular sympathy for farmers. Therefore, I share the hon. Lady's feeling. Indeed, as a student I worked on farms in England


during my vacations and talked to farm labourers here. I know something about the problems of farmers in England and in Wales.
Speaking of Wales, I hope that the Government will do something to remedy the disgraceful situation in which a tenant farmer can be continually harassed by his landlord and ousted after he has improved his land and outbuildings. However, that is perhaps outside the scope of the Bill.
With the farmers of Northern Ireland making no money this year, particularly since the beef market has collapsed, what hope has the small farmer of paying £2·41 a week, or 8 per cent. of his earnings in other cases? Farms have been running at a loss. In many cases farmers will not be able to feed their animals. Farmers are selling off their animals now at a great loss. Anyone who has anything to do with the farming community should speak on the Floor of the House with all the fervour at his command in an effort to persuade the Government to aid the farmers, particularly those in Northern Ireland, where the farms are small and depend on imported feedings stuffs and fertilisers. Bankruptcies among small businessmen, as well as amongst farmers, are worse this year than ever before. It might help hon. Members to make up their minds in this debate if the Government were to give figures of such bankruptcies. This extra burden in contribution is too much to bear. For some it will be the proverbial last straw.
I must speak up on behalf of the self-employed in Northern Ireland, whilst acknowledging all the merits that the Bill has. The Government should consider imposing a much more modest increase in the cost of the class 2 stamp, and the class 4 contribution should continue at the existing rate of 5 per cent. instead of rising to 8 per cent. at this time of extreme difficulty. I recognise that inflation is bound to have its consequences for social security contributions, but are not the Government contributing to the spiral of increasing prices by introducing higher contributions at this time?
I notice that the cost of publication of the Gracious Speech has risen by 60 per cent. I do not know whether anybody

has yet referred to this fact during the debate on the Queen's Speech or even noticed it. The cost of the Gracious Speech on 12th March—only seven and a half months ago—was 5p. It has risen to 8p for this Gracious Speech, which uses the same amount of paper and contains as far as I can judge the same amount of print. I do not know whether one can rely too much on what is contained in the Speech. I do not think there is value for money in it. How can the Government justify a 60 per cent. increase? They are directly responsible, because the Speech is published by Her Majesty's Stationery Office.
Class 2 contributions will be almost doubled, yet for paying an increase of that order the contributor will not get any extra benefit. Is that justice? Is that fair? Is that what we are to expect from a Labour Government? I had expected better of them. I hope that the Government will think again about this.
It is no use the Government saying that a self-employed person may claim the small income exemption if his income is less than the statutory amount. If he claims exemption, stamps will be missing from his card, which will worsen his insurance record and must eventually affect his pension rights. I therefore hope that the Secretary of State will discuss the whole question of insurance contributions by the self-employed with her Cabinet colleagues who are responsible for agriculture, trade and commerce before the Bill goes into Committee.
Changes would have to be made in the Bill. The average self-employed person cannot go on if he is to be penalised by social security contributions. As every report by the Government Actuary shows, the self-employed take out of the National Insurance Fund far less proportionately than class 1 or employed contributors. The self-employed person is not entitled to unemployment benefit. The self-employed bear this heavy burden but get little in return. That is not fair.
I welcome the provisions for the improved social security benefits, but I regret, as the Conservative amendment sets out, that married women and widows are also affected, those
who have elected not to pay insurance contributions at the full rate.


I must demonstrate my feeling by going into the Division Lobby against the Bill tonight.

8.7 p.m.

Mr. R. J. Maxwell-Hyslop: I gladly follow where the hon. Member for Down, North (Mr. Kilfedder) left off, because my concern is very similar to his.
I note that printed on the back of the Bill is the statement:
Presented by Mrs. Secretary Castle, supported by Mr. Chancellor of the Exchequer"—
that is ominous—
Mr. Secretary Ross"—
that is even more ominous'—
Mr. Secretary John Morris.
If that does not give us all the warning we need to have about the Bill's contents we have not kept our eyes and ears open. It is in the areas which those two Secretaries of State represent and in Northern Ireland and in the area which I represent that the self-employed, particularly farmers and more particularly the livestock section of the farming community, are most desperately at risk.
The Bill is entitled "Social Security Amendment Bill". What are the glaring gaps in social security for the self-employed? A farmer now going bankrupt because of the progressive collapse of livestock has income tax to pay on the last financial year's profits. It was said. "Pay as you like", by some quite uninformed hon. Members opposite from well away from here in Scotland. A farmer cannot pay till he has his assessment. He may well have an assessment that he has made a profit on which he must pay income tax, not because he has any money, but because the value of his stock at the end of the financial year was marked up. He then has to pay income tax with money he has not got because the stock has not realised in the market 60 per cent. of what it was valued at for income tax purposes. He is now being loaded with these enormous contributions.

Mr. O'Malley: I am glad to be able to tell the hon. Gentleman that the farmer concerned will be assisted by the formula which we have devised. If during the period for income tax assessment, April 1975–76, his income has been so eroded as the hon. Gentleman has described, by our formula he will be paying no more

in class 2 contributions than he is at the moment. He will certainly not pay any in class 4 contributions. That is surely a better alternative than that which the Conservative Front Bench is putting forward, involving an increase in class 2 contributions which would hit the farmer to the extent of £30 or £40 a year.

Mr. Maxwell-Hyslop: But a farmer does not know what his income is till the end of the financial year. A person receiving a weekly or monthly cheque on which PAYE is payable knows what his income and assessment are, but a farmer does not know what his tax assessment is to be till after the end of the financial year.

Mr. O'Malley: I am trying to help the hon. Gentleman. I understand the problems of agriculture. There would be no assessment of a class 4 contribution till the end of the financial year, and perhaps even later than that, because Schedule D earnings are sometimes not assessed for 12 months and sometimes two years after the relevant income tax year. The point to notice is that, first, there would be no assessment on him for class 4 contributions till such time as his accountant had agreed his Schedule D earnings; and secondly, if his Schedule D earnings were very low indeed, which is the proposition which the hon. Gentleman puts forward, there would be no obligation on him, if his income were below £1,600 a year, to pay any class 2 contributions at all. The class 2 contributions would have to rise under the proposition postulated by the Conservative Front Bench, and I would prefer to hold down those contributions to help the kind of person to whom the hon. Gentleman is referring.

Mr. Maxwell-Hyslop: The hon. Gentleman means well. His limitation is not his intention but his sheer lack of understanding. He has not grasped the point that I was making. The price of cattle in the market now is less than the price for which they were purchased, and they have been fed for a year. In the case of those who remain in business and who are not bankrupted in the next few weeks, what will the stock valuation be for the next financial year? It will show a paper profit because they will be valued up, but there will not be any money in the till. The assessment of farm profits


includes the difference in stock valuation. A farmer can be shown, for income tax purposes, as having made a profit when he literally does not know where to turn for half a new penny. That is the point that I was making, and, with respect, the Minister's formula does not encompass that.
This is the problem. They are being burned at both ends of the candle. I am concerned about the farmer who is driven out of business because the Government have refused to carry out the pledges of their own Minister of Agriculture concerning beef. Such a farmer cannot draw unemployment benefit, despite the self-employed contributions that he has always paid. His assets till he has sold up are likely to be such that he cannot get anything from the Supplementary Benefits Commission. He loses his home. If he has been an owner-occupier he cannot get even a council house for himself and his family because so many councils have a rigid rule that they will never allocate a council house to anyone who has been an owner-occupier.
This is the sort of desperate position of the agricultural community. If there were an option for self-employed people to pay a higher rate of contribution and to have insurance against losing their livelihood they would indeed have the same measure of social security as other people. They are not insured against industrial injuries. The self-employed person has to be able to put aside savings to use when in extremis, when he has no income, when he has got to pay his weekly contributions. The farmer, the shopkeeper, the commercial traveller and such people, when they have no money coming in, still have to pay their self-employed national insurance contributions. They have to pay out of nil income.
We need a Social Security Amendment Act which is meaningful, instead of crucifying the self-employed who do not enjoy the security that other people on exactly the same income enjoy, the security of knowing that if their source of earned income is terminated employed people can get benefit, which self-employed people cannot—

Mr. Kenneth Marks: Has the hon. Membre had any

demand from his self-employed constituents—I have not—that they should pay additional contributions to qualify for industrial injuries and unemployment benefit?

Mr. Maxwell-Hyslop: No. I have not, and many of them would be unable to do so.

Mr. Marks: On £70 a week?

Mr. Maxwell-Hyslop: I am particularly concerned at the moment with the plight of law-abiding people who have been driven to extremities of which some hon. Members are not even yet aware. These people live in tied cottages they live in the farmhouse. When they can no longer pay their rent because their income has collapsed, out of the house they go, as well as out of the farm. An owner-occupier cannot sell his farm without selling the farmhouse as well. This is a section of our society whom even a Labour Government would call productive, I presume—since they divide people into productive and non-productive categories—who are being crucified in this Bill as well as crucified in their livelihoods. That is why it was to be hoped that a Social Security Amendment Bill presented under the conditions which exist today would contain provisions to encompass this crucial situation.
I wish the Secretary of State were here to wind up the debate—if she were I am sure the House would give her leave to do so—and then would tell self-employed people what she expects them to do when they have lost their livelihoods. What does she expect livestock producers to do when they have had to shoot their beasts and bury them because there is a three-week queue for the slaughterhouse, their grass is finished and they have no money with which to buy fodder to feed those beasts for three weeks? I wish the right hon. Lady would say what people are to do when they cannot draw unemployment benefit, though their livelihood has been driven away by this Government. although they have paid their national insurance contributions year after year. I wish that she would tell them either what they should do or what she proposes that Parliament by this Bill should do for them.
If the Secretary of State does not do that, and if no other Minister does it,


she will be inviting these people to arrive at a sad conclusion, the conclusion that the Government and Parliament can offer them no solution to their problem, and that state of mind and of affairs is what moves people to take action which all of us in the House would deplore. Cannot the Minister understand the likelihood of that reaction, when Government and Parliament, knowing of the desperate plight of these people, and at the same time introducing a new measure to bring social security up to date, say to them, "You are all left out of it"?

8.20 p.m.

Mr. George Cunningham: The hon. Member for Tiverton (Mr. Maxwell-Hyslop) made an interesting speech about the situation in agriculture, which he ingeniously managed to bring within order on the Bill, but does he seriously believe that the problems of farmers and the necessity they feel to shoot beasts and so on could be solved by anything which could have been put into the Bill?
The hon. Gentleman suggested that a proper way of dealing with unemployment among farmers, which one hopes will not be a long-term problem for them, would be to permit them, I presume, to pay both the employee and the employer contributions for social security, thereby entitling themselves to the forms of benefit to which they are not entitled at the moment by paying only the self-employed rate.
That is an attractive idea and I think we should pursue it. Indeed, it has been pursued in respect of some groups of people. One would have to draw a distinction to identify those groups whose unemployment could manifestly be shown to be outside their own control. I am sure that that could be shown to the hon. Gentleman's satisfaction in respect of his farmers, and in particular circumstances it could be shown in respect of farmers in general. But it certainly could not be shown in respect of all self-employed people in all circumstances.
That is why from the beginning of the system, from 1949, one has not given to all self-employed people the option of paying both the contributions and receiving all the benefits, since they would then be able at their own wish to make themselves unemployed and derive the benefits.

Mr. Maxwell-Hyslop: I did not suggest that the Bill was a vehicle to enable farmers to keep farming. However, it is a vehicle, I suggest, that should enable them not to starve when they have no income. In response to the hon. Gentleman's other comment, I say only that if a self-employed person were to draw benefit fraudulently, that would be just as culpable and just as punishable as the fraudulent drawing of other social security benefits by other persons.

Mr. Cunningham: It would be fraudulent and punishable, but if it were not detectable that would be the problem. Unless the hon. Gentleman acknowledges that, he does less than justice to my argument.
There has been reference to the position of Members of Parliament in relation to the Bill, and I am confused as a result of what has been said. Although this is a domestic House of Commons matter, when we are legislating for the community as a whole I think it right for us to be clear on what we are doing about ourselves.
I take it—though I had not been aware of it until now—that we are providing that in future under our national legislation it will be possible for Members of Parliament to be regarded for these purposes as employed, and the Exchequer will pay the employer's contribution and we shall pay privately the employee's contribution.
The legislation may permit that, but I do not recall ever having voted—as one-six-hundred-and-thirty-fifth part of my employer, as it were—that public funds should be used for providing the employer's contribution to that end, and before it is done, if it be proposed that it should be done in April, I wish to be consulted. I shall decide how I wish to vote, on a resolution of the House, which would be appropriate for this sort of purpose, on whether it is right that we should go over to that system.

Mr. O'Malley: As I recall the matter —I am not speaking from a brief, and perhaps the hon. Member for Rushcliffe (Mr. Clarke) will confirm what I am saying—during the proceedings on the Social Security Bill in 1973, on which my hon. Friend played a distinguished part, the decision was taken that office holders, which included Members of Parliament,


judges and directors of public companies, should be treated as class 1 contributors.
As I understand it, the position which will arise in April, when Members of Parliament are to become class 1 contributors, stems directly from the decision taken during the consideration of the Bill in 1973. Moreover, if I recall aright as a member of the Opposition at that time, the respective Whips' Offices of Opposition and Government conducted soundings among their Members at that time.
That is the reason for it, and that is the history of the present position according to which Members of Parliament will become class 1 contributors along with Her Majesty's judges and certain other groups of people as from April next year.

Mr. Arthur Lewis: Will my hon. Friend give way?

Mr. Cunningham: I think that I should resume my speech—

Mr. Deputy Speaker (Mr. Oscar Murton): Order. We cannot have an intervention on an intervention.

Mr. Cunningham: Quite so, Mr. Deputy Speaker. I recall that matter vaguely in relation to the 1973 Act now that my hon. Friend reminds me, but it does not altogether remove my problem. I quite see that national legislation may make it possible for that to happen, but it seems to me nevertheless that a decision that that money shall be paid is required by the House not in its capacity as a legislature but in its future capacity as an employer. My hon. Friend says that the Whips took soundings. I took part in no soundings, and I should hope to be consulted. I think it necessary for the House to take a decision by means of a motion that the employer's part of it should be treated in that way.

Mr. Arthur Lewis: Will my hon. Friend give way to me now?

Mr. Cunningham: I would rather not, if my hon. Friend does not mind, because I feel that it would be more appropriate to conduct this aspect of the matter in the way I have described. The public will not now be able to complain that they were unaware of it.

Mr. Lewis: In 1971 and 1972 I raised the question from which the present position has derived, but I can assure my hon. Friend that, although I raised it on a number of occasions, I too was not consulted.

Mr. Cunningham: Well, as somebody said about Plato "wherever I go in my mind I meet the hon. Gentleman coming back".
It has been suggested that the self-employed are being clobbered, the word used by the hon. Member for Basingstoke (Mr. Mitchell), or crucified, the word used by the hon. Member for Tiverton, by the provisions of the Bill. It is incontestable that the self-employed are being asked by the Bill to pay a marked increase in their contributions. and a higher increase in their contributions than applies in the case of other contributors as a class, although there certainly will be some self-employed who will be contributing very little, if any, more than at the moment.
As a group, however, the self-employed will be paying a larger increase than others, although that surely is not the question. The point is whether they will in future be paying a fair contribution in relation to the benefits which they will in future be deriving. My right hon. Friend the Secretary of State has given the House important relevant statistics—namely, that if the self-employed were to pay a contribution equivalent to the benefits to which they are entitled, and which they draw, they would have to contribute 90 per cent. of the value of the combined employer and employee contributions.
It never has been the case, apparently, that the House of Commons was prepared to impose that fair contribution upon the self-employed, even as far back as 1949. Instead they were charged a contribution which amounted to only 70 per cent. of the combined contributions of employer and employee. Over the years the value of that contribution fell to something below 50 per cent.—I believe close to 40 per cent.—of the combined contributions. Now, as I calculate the figures, they will be contributing between 57 per cent. and 68 per cent. of the combined contributions, whereas they should be contributing 90 per cent. Whether they contribute at the lower end or the upper end of the 57 per cent. to


68 per cent. range will depend upon their income.
That contribution seems to me to be more than fair to the self-employed, and it would be fair even if we were starting from scratch. If we were starting from scratch, an objection to those figures would be that they entailed a subsidy from the employed person to the self-employed, and in logic that could not be defended. However, we are not starting from scratch and we are moving over to a new figure from one which was unreasonably generous to the self-employed. I can see that some people would regard that as too abrupt a transition. It is not too abrupt because of other factors, but that is the strongest argument that can be mounted against the Bill.
One of the reasons why it is not too abrupt is that on the whole the self-employed person is treated very generously by our taxation system—over-generously in fact. The self-employed man is entitled to allowances on a more generous definition than the employed person. The difference is well known and is not relevant to the content of the Bill. I cannot therefore go into it in detail.
On the whole, the self-employed person has nothing to complain about in the tax system. He pays his tax later than other people do in relation to the income on which it is charged. He enjoys a more generous definition of allowances. These are all legal differences, and in practice he has, to put it moderately, a greater scope for defining his income at the lower end of the range rather than at the upper end. The bus driver, on the other hand, has no scope for arguing with the Inland Revenue about how much he is paid. His employer notifies the amount to the Inland Revenue. The bus driver never sees his tax money because it is taken away before it reaches his pocket.
The self-employed person, in addition to the legal differences to which I have referred, has considerable scope for playing down the income he receives. This has been done and is now being done more widely, not by the kind of deserving case described by the hon. Member for Tiverton (Mr. Maxwell-Hyslop) of the farmer in difficulties but, for example, by the television producer. He arranges

not to be employed by the television company but to be on a contract and is therefore classed as self-employed. He then finds it easy to claim for half his house as an office and for his wife and daughter as his secretaries and so on. By that means he manages to have a net income from his salary which is effectively much larger than it would be if, as is correct, he were treated as employed.
Given that the self-employed come out of things pretty well under the tax system, the transition from the overgenerous arrangement of recent years to a position half way between that and what would properly represent the benefits which the self-employed draw from the system is not too abrupt a jump. In any future review of these matters the natural course would be for the self-employed to pay a contribution actuarially calculated to reflect the exact benefits to which they are entitled.

8.35 p.m.

Mr. Walter Clegg: The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has argued that the contribution from the self-employed person is going up merely a little too fast in the circumstances, and that that is the most that can be said about the matter, but I do not follow him in that argument. He is entitled to his point of view: it is a little more reasonable than other arguments from the Government Front Bench. But the hon. Gentleman made an implication—the hon. Member for Fife, Central (Mr. Hamilton) made a similar implication—that a great many self-employed people are fiddling their taxes.
That implication will be bitterly resented outside the House. I do not think that it affects the argument before us at all, but if the situation is to be put right—if abuses exist—it should be put right fiscally; and it should not form part of the argument we are debating here.
I do not think that the Minister and, indeed, the Government Front Bench in general realise the deep anger being felt over this matter. I can illustrate this feeling by relating a constituency experience. Last Sunday I was asked to address a meeting of the National Federation of Self Employed, the body to which the


hon. Member for Fife, Central referred. The meeting had been called to inaugurate a branch in my constituency and the surrounding Fylde area. I expected to find 30 or 40 people present, but on a cold, rainy day 270 people turned up. They were in a passion. I have never known such a wide range of people in one audience. I confess that I did not see a TV producer, but there were fishermen, barmen, butchers and bakers, and many other categories of self-employed. They were all incensed.
If one judges an audience not by what it says but by what it does after a meeting one can more clearly gauge the feeling. The audience I am speaking about was asked to join the federation. The subscription is not small. It is about £12 a year, and most members of the audience decided to join. So they were putting their money where their mouths had been during the discussion.
I make this point because it is not only in relation to the matter we are discussing but in general terms that self-employed feel that they are being picked on. The hon. Member for Fife, Central said, I think, that the Labour Party almost liked the self-employed and that they were reasonable people, but the Government have the strangest way of showing this—

Mr. William Hamilton: So have you.

Mr. Clegg: If the hon. Gentleman is claiming that the Conservative Government proposed the legislation from which the latest proposals have been adopted, that is not really the point; we are concerned not with who brought the proposals in but with the effect of the proposals—

Mr. O'Malley: I understand the arguments that are being used by individuals in the community who are self-employed, but it was a Conservative Government who brought in this structure. It is perfectly clear that the only difference between us is whether the figure should be 5 per cent. or 8 per cent. on the band that is being discussed. No matter what action a Conservative Government might have taken the hon. Gentleman would still have encountered the sort of meeting he has been speaking about. There are times when Members of Parliament,

having made a joint decision on structure, should have the guts to stand together and tell people that this has been a joint decision of all the parties in the House of Commons.

Mr. Clegg: It has not been in doubt from the beginning of the debate, and it has never been denied from this side of the House, that the Conservative Party set up the structure. I agree with the hon. Gentleman that there would probably have been a row anyway when the situation became apparent. It was like an unexploded bomb that suddenly goes off. But the fact that we introduced it and the Labour Party backed it does not mean that we shall not listen to what the self-employed have to say. It seems clear that Labour Members are all for the employed person, but they have shown no real concern today for the self-employed.

Mr. George Cunningham: In July exactly the same provisions were introduced into the House, and the Opposition did not vote against them. If they had felt in unison on the matter, the Opposition parties could have defeated the provisions or amended them. Why did they not do so? Were the provisions right then but wrong now, or is it that they are still right and the Conservatives are cashing in on the popular crusade?

Mr. Clegg: If the hon. Gentleman had heard my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), he would already have the answer. It was the Opposition's intention to raise the matter in Committee, as we were entitled to do.
Deep anger is felt outside the House. As my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) said. unless the House takes note of anger and reacts to it, we shall all be in difficulties in Parliament.

8.42 p.m.

Mr. Kenneth Marks: One way to get a big meeting in any constituency is to make people pay for something for which they have not paid in the past, whether or not it is fair for them to do so. That applies that it was a Conservative Act that to rates and many other matters. I wonder whether the hon. Member for North Fylde (Mr. Clegg) told the meeting


increased the contributions for self-employed people. If such a meeting had been held in my constituency, I wonder whether self-employed shopkeepers in a clearance area or employees of the various factories there would have been able to put down £12 as a contribution on the same night.

Mr. Clegg: I explained that my Government introduced the Act to which the hon. Gentleman referred.

Mr. Marks: I am grateful to the hon. Gentleman.
I must apologise for not having been here when the opening speeches were made. I was on other parliamentary duties.
One of the big talking points on pensions and benefits in my area during the election was the tax on widows' pensions and national insurance retirement benefits. I realise that it is not a matter for my hon. Friend the Minister of State, but many widows and retirement pensioners who receive a pension of £10 a week and earn £10 a week have a bit of a shock when they pay tax on the whole £20. That is an important matter that I hope my right hon. Friend the Chancellor of the Exchequer will consider. I have asked him to do so.
The problem of the increase in self-employed contributions is largely one of the suddenness of the increase. We have faced the problem in a number of ways recently. In March there was the introduction of a much fairer system of rates. The Conservatives' Local Government Act and the Labour Government's domestic relief both introduced a fair system, but there was a sudden jump which angered people greatly. The Government did something about it later. Often fairness means a big increase for some people, because they have been doing very well in the past.
Much of what we are discussing arises from the Social Security Act 1973. I served on the Committee considering that measure. The hon. Member for Brentwood and Ongar (Mr. McCrindle) heavily defeated his own Government in Committee and almost defeated them in the House.
In the past there has been a bias in favour of the self-employed. It was estimated by Beveridge that the self-employed

should contribute roughly 90 per cent. of the combined employer-employee contribution, but it was originally put at 70 per cent. and at the moment is only 40 per cent. of the combined contribution. That has meant that there has been a racket. Many people have transferred to self-employment. That is one of the problems in the building trade—namely, "the lump". It has been thought worth while to get into self-employment not only because of contributions but because of tax. There have been a great many favourable features for the self-employed. For example, contributions are estimated not on gross income but after certain considerable deductions have been made.
The principle was accepted throughout the House that from April 1975 the self-employed should pay more than they have been paying in the past. Employed contributors had been paying an increased graduated contribution for the increased basic pension. We regarded it as fair that a man earning £50 a week should pay more than a man on £20 a week for the basic pension. Indeed, that was the whole idea of the Conservatives' Act and their new pension arrangements. It was agreed that there should be a percentage of income paid for a flat-rate pension. There is no argument about the principle. The argument is about from where the money should come for the increase which was made in July in pensions and benefits.
The Opposition did not argue whether that increase in pensions was necessary. They may not have agreed with it. They would not have done so if they had come into power. They did not oppose it when it was introduced. Where should the money come from for the increased pensions? Should it come from the employees who are already paying an unfair share? Should it come from the employers? I doubt whether there would have been cries of rapture from the Conservatives had the increase in employer contributions been much higher. Should the money have come from the self-employed.
It was thought fair that it should come from the self-employed so that they could take their share of the burden. Should it be a flat-rate or should it be a graduated contribution? It seems to be fair that it should be a graduated contribution. On the figures used by the Conservative Government in 1973 the earnings band was to


be from £1,150 to £2,500. They now say that they would leave it at that. They certainly would not.
The hon. Member for Somerset, North (Mr. Dean), who was leading for the Conservative Government, said that it was their intention that the upper contribution limit should be around 1½ per cent. times gross earnings. That is what we have done. Although many of my constituents are upset, I must say that the Government have treated the matter fairly. It is said that the self-employed should pay their share as a flat-rate contribution, with the self-employed person on £70 a week paying the same as the man on £20 or £30 a week. If that were put into effect some of the small shopkeepers who have had to suffer a great deal from slum clearance and such problems in the great cities would have to pay a much greater contribution. As it is, contributions will be assessed fairly on income.
It has been suggested that there should be an increased contribution by the self-employed to that they could draw unemployment benefit as well. Fair enough. There is an argument for that. There is an argument for saying to the self-employed "You pay the same as the employer-employee contribution; get the same tax relief and the same benefits." However, I do not think that they would accept it. I must say that the Government have acted in fairness, and I shall support them in the Lobby.

8.50 p.m.

Mrs. Lynda Chalker: Like other hon. Members I welcome any improvement in social security benefits, but although the Government have stated time and again that they aim to be fair I do not feel that they are being fair to women who opted out and wish to continue to opt out. Nor are they being fair to the self-employed.
I was delighted to learn that the Minister now agrees that the pensioner population is rising very fast. I hope that he will remember this when we discuss the Government's second pension proposals based on the actuarial statement that the pensioner population will not be substantially greater in 1998 than in 1978.
I am concerned tonight to look forward to the future for people who are doing their best to keep their economic heads

above water and to create industry. I do so coming from an area with nearly 10 per cent. unemployment. I want to see those with whom we are concerned today, people who want to do well for themselves, getting encouragement. As contributions of various kinds, be they fiscal measures, increased business rates, rising interest charges, or the difficulty of getting a loan from the bank, all encroach upon them, the Government are placing on top a very steep rise which could have been avoided if they had looked a little further.
When the leaflets on this measure were distributed my constituents were in uproar, and many have joined the association we have heard about tonight. They know, through the harsh experience of the last three or four months, that there is no joy when the self-employed man goes bust, when his employees are out of a job. For him there is no redundancy pay. Nor does he get industrial injury benefit. He gets none of the benefits which so many of us have taken for granted for a very long time.
I commend to the Minister the quotation from John Milton used by the Secretary of State for Employment yesterday about our people:
a nation not slow and dull, but of a quick, ingenious and piercing spirit, acute to invent, subtle and sinewy in discourse, not beneath the reach of any point the highest that human capacity can soar to.
It is this sort of inspiration which is the drive behind self-employed people. They are people who want to do better, to be self-reliant, to exercise individual responsibility. These are the people who will set the lead and put to rights many of the things which are wrong today in our country.
We may all have to take some individual belt-tightening. That we shall accept, and no doubt we shall know all about it next Tuesday, but by this Bill the Government are imposing an unfair burden on top of all the other burdens the self-employed have. We have heard about the beautiful lives of self-employed men who work from home; but they are subject to capital gains tax by using their home place for employment, they are subject to commercial rating. Neither of these things is a prospect to be enjoyed.
How are self-employed people to go on creating wealth? The answer is that


they are not going to do so. The action of the Government in putting this additional burden on them rather than on employed people, which is where, presumably, it could otherwise be, is unfair. There are 6 million people employed by small firms and there are about 1¼ million small businesses. It is not only farmers who are threatened, as my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) pointed out; it is any small business which happens to be a family business, because this Bill is yet another measure from a Government bent on destroying incentive and the initiative of people who want to do better for themselves and to create new wealth. The Government are all set to destroy that incentive and that wealth.
As my constituents go out of business, I do not come lightly to the House to ask the Minister to go back to the drawing board with this Bill. In Committee, if we do not defeat the Government this evening, he must bear in mind the craftsmen and the many businesses that are not dying just for now but dying for good, businesses on which this country has rested before and on which it has depended in times of trouble and to which we turn more and more. There is a great deal that the Government can do to inspire people to do better. That is what they should do, rather than destroy every incentive that those people try to create for themselves.

8.56 p.m.

Mr. R. A. McCrindle (Bentwood and Ongar): I have sat through most of this debate, as I find myself sitting through most of the debates on social security. Unfortunately, because the clock is running against me, I shall have to speak rather more fleetingly than I wish. However, I should start by saying that there is always something of an old boys' reunion about these debates as on both sides of the House there are Members who are regular contributors, but these debates are none the less valuable for that.
As nobody has yet done it, I should like to congratulate the hon. Member for Rhondda (Mr. Jones) on his elevation to junior Minister at the Department. He and I have not always agreed about social security matters, but I have always respected the great sincerity that he brings to them and I was as delighted with

his elevation as I should have been with that of any hon, Gentleman on his side of the House. I wish him a suitably short but appropriately happy stay.
The hon. Member for Manchester, Gorton (Mr. Marks) flattered me out of all recognition when he said that I had inflicted a heavy defeat on the Conservative Government. I must confess that I did not think I had done it single-handed. I remember that in Committee I had the small assistance of himself and the hon. Member for Islington, South and Finsbury (Mr. Cunningham). I shall look forward to seeing the pensions legislation that is brought forward by the hon. Gentleman's Government to see whether, after all the sound and fury in which I was happy to join in those days, the point that we were trying to make is taken up by the right hon. Lady in her legislation. It will be interesting to see the Bill's final form.
I have to make an inevitably short speech and I therefore want to stick to the subject of the self-employed. It is a theme that has been running through every speech from both sides of the House this evening, and mine is no exception. I do so because I genuinely detect an incipient rise of feeling among this class in the community, and I believe that the Government would be unwise to turn a deaf ear to the sounds that are emerging from a section of society that until now has been comparatively taciturn.
I believe that the feeling of unfairness —I emphasise that it is a feeling of unfairness—that emanates from the self-employed, as manifested in their quite extreme opposition to the increasing rates that they are having to pay, is something to which the Government must pay attention, even though they may rationalise it, as some of their more capable Members have tonight rationalised it, as a feeling of unfairness rather than necessarily unfairness itself.
The fact is that, in a society in which to get something for nothing appears to have become almost the order of the day, the self-employed see themselves as being asked to pay something for nothing. This is a twist in the something-for-nothing syndrome. I believe that the Government must pay attention to this sense of injustice. What the self-employed complain of is to some extent less that they are being asked to pay more, than that


they are being asked to pay more for, again as they see it, no additional benefit.
I must be careful. During the long period that I served on the Standing Committee which considered the 1973 Social Security Bill I accepted the principle which basically we are discussing tonight. It can be summarised as a redistribution of income. If any hon. Member cares to consult the record of those proceedings, he will see that I spoke of it in those terms—and comparatively approvingly. I do not speak against the principle of a redistribution of income in this regard, but I draw attention to the fact that, that principle having to be accepted, the seemingly unfair way in which it is being done to the self-employed person is the real source of grievance.
I tried to get some figures from the Minister earlier in the debate—unsuccessfully, I may say. But there lies the kernel of the argument of the self-employed. If we say to them that, at a high level of income, if a person is employed his contribution will go down but that if he is self-employed and earning the same amount his contribution will go up substantially, no matter how the self-employed person rationalises the need to redistribute income that will rankle considerably.
There is a feeling among the self-employed that this proposal represents a transfer of income from the hard-working, the industrious, the independent, the risk-taking sector of society to those who perhaps have not been prepared to show these qualities. At a time when qualities of that kind are progressive at a premium, the Government would be unwise to run the risk of this feeling becoming widespread.
If a self-employed person wishes to provide a reasonable pension for himself, he has to do it under a self-employed pension scheme. Although there are tax reliefs of a sizeable order to encourage him to do so because he does not have an employer to pay the employer's contribution, nevertheless he sees that as his employer's contribution and he cannot understand why the overall benefits that he receives are in his view so inadequate and unfair.
At the heart of this debate is the question of how the present Government view the self-employed man. I wonder whether they welcome the risk-taking, the inpendence, the preparedness sometimes to give up a job with regular hours in order to take on a business which is a major challenge and to work far longer than when one had an employer and to show that spirit of independence which has been the watchword of the self-employed since time immemorial. Do the Labour Government welcome the existence of the self-employed, or is it their eventual ambition so to discourage the whole business of moving into self-employment that in the end the number will recede and disappear?
The other mistake which the Government make is somehow to equate the man who is self-employed with the self-employed barrister or stockbroker earning a very high income. They have to accept that there are thousands of small self-employed people such as greengrocers, newsagents and other shopkeepers. It is they rather than the self-employed stockbroker or barrister who have this sense of grievance. The Government would be extremely unwise to overlook this view which is so prevalent among such people. Even at this late stage, I hope that the Government will pay real attention to the fact that every speech from this side of the House has touched on this one point and that the Minister will ask himself whether, if he continues to insist on pushing ahead with this measure, he will not alienate the self-employed upon whom ultimately every Government depend.

9.5 p.m.

Mr. Kenneth Clarke: My first pleasant duty is to congratulate the two maiden speakers whom we have heard enlivening our proceedings on the Bill.
The hon. Member for Sheffield, Bright-side (Miss Maynard) made an eloquent and welcome contribution to the debate. I regret, Mr. Deputy Speaker, that you will not allow me to enter into the discussion about agricultural tied cottages which she managed to introduce into the discussion on the Social Security Amendment Bill. Nevertheless I was fascinated by it. I look forward to similar contributions on the same theme in other debates from the hon. Lady. Of course, we remember her predecessor. Although it is not for me


to give words of advice to anybody, perhaps we should advise her during her tenure in this House not to accept invitations from Tory Members to spend weekends with them for any purpose anywhere since that led her predecessor into some difficulty with his Labour association.
The hon. Member for Dunbartonshire, East (Mrs. Bain) also made an eloquent speech and offered us the support of the Scottish National Party. We welcome the way in which she made her contribution and look forward to hearing her speak again. It occurred to me as the debate went on that the Government and the Minister who is to reply to the debate should take warning from the fact that the Scottish National Party has offered its support to us.
It is not only from the Conservative benches that the Government's proposals are being attacked. The Government are no doubt fearful that one day this strange coalition, as we undoubtedly are, might come together. It has not taken very long for us to win the support of the Liberal, the Scottish National and the United Ulster Unionist Parties, all of whom have taken part in the debate and have said that they will support our amendment in the Division Lobby.
My further pleasant duty is to welcome the new Minister to his responsibilities. This is the first opportunity I have had of welcoming him. All who speak on this subject are familiar with his views. I genuinely join my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) in welcoming the hon. Gentleman to his position and look forward to his contribution.
I am glad that we have a new Minister replying to the debate. After the period for reflection since the last debate, it is time that we had some new attitudes being brought by the Government to bear on the difficulties they have got into by the way they have framed this legislation.
Reference has been made to the fact that this is our second debate on the subject. It is our second attempt going back to July this year, and the Government have had time to reflect. The Minister of State can hardly be startled to find that this time we are taking a more severe view in both the debate and

the Division Lobby. The Government consistently ignored our warnings in July when we pointed out what we thought must have been inadvertence, and now the Bill comes back quite unaltered on important matters. Indeed, it contains what we see as a savage attack on the independence of the self-employed and on married women who exercise the choice that they are entitled to exercise to pay the reduced rate of contribution. The Bill appears to be a determined and persistent Socialist attack on self-reliance which is presented before the House again.
We must get crystal clear the basis upon which we continue to make our attack. The Minister of State has come back to his seat. In his introductory speech he displayed his usual charm, but sometimes, if I may say so with respect, he is a slippery customer when it comes to presenting such matters. The hon. Gentleman is a past master at covering himself with a smokescreen of the intricacies of the National Insurance Scheme. Those who ask for more agreement on the figures should, when they reread his speech, notice that the figures on both sides are agreed but that the hon. Gentleman slips from percentages in one category to figures in the next and from comparisons with 1973 at one moment to comparisons with the present time the next. The hon. Gentleman has been concealing himself under a smokescreen.
Our position remains clear. We welcome the increases in benefits that the Government believed they were able to afford when they announced them in the spring. We accept that the public appreciate the problems of pensioners and other beneficiaries and are certainly prepared to pay. Increases are easily announced. The skill of the Government in this sphere should be to share the burden of paying for those increases fairly and not to go beyond the capacity of any group to pay. We suggest that that is what they have failed to do.
Fortunately, one of the few things that has become clear is that the Government are building on the proposals in the Social Security Act 1973. We do not go back on them. In fact we are proud to have introduced the concept of graduated, earnings-related contributions to finance the National Insurance Scheme.


It helps us to escape from the previous restraints on the system which meant that the level of the stamp had to be pegged to what the lowest paid could afford to bear. Our new structure means that there is new revenue and buoyancy in the fund.
The 1937 Act always meant that our new graduated contribution would become payable in April 1975. Under our scheme, contributions for the lower paid would always go down. It is no good the Minister emphasising how considerable sections have the burdens reduced. The Conservative Government's reform had that built implicitly into it. Also, I accept that our structure always envisaged increases for the better paid in April 1975. Here we begin to come to what an American would call the rub. It was very welcome, and I shall not say that it was with an eye to a coming election, when the Labour Government increased the benefits substantially in the spring of this year and provided for great improvements in benefit for hard-pressed sections of the community. That is fair enough. That means that the Government are increasing further the increases in contribution which we left in the pipeline even before they have become payable. Therefore, increases which we contemplated are having to be increased to pay for this spring's review.
For that reason, the increases in this Bill are not only increases in the scales of income on which the contributions bear—we had always envisaged that; that would have been right if the Government had done it—but the Government have had to increase the percentage of contribution category by category. Over and above the increases in national insurance contribution which became payable in August of this year on top of the increases in personal taxation which the Chancellor of the Exchequer introduced in the March Budget, they are having to increase the percentages always implicit in our contribution proposals.
I almost say again "Fair enough", because we accepted the increase in benefits this spring and we must therefore accept that the increase in contributions had to go up. But if our proposals for the percentages on which the contribution should be assessed had to be in-

creased, those percentages should have been spread across the board to all categories under the structure which we left behind. Our case is that that has not been done. The Government have intervened in the structure and they have transformed our proposals for two groups, the self-employed and the married women. It is wrong for the Government to pretend that they have not done so. They are hitting some members of those two groups much harder than we proposed or envisaged.
That is the proper basis for comparison with what was envisaged in 1973. The Government have twisted our structure to penalise those two categories by increasing the percentages to pay for this year's increase. The comparison to be made in discovering how the burden has been laid on different categories is this. The employed person's contribution is raised from 5·25 per cent. to 5·5 per cent. over the adjusted range of earnings—a modest increase. That is not so with the other categories whose cause we are taking up.
Let me deal first with the stark difference for married women who opt to pay the lower contribution. The comparison with the small increase from 5·25 per cent. to 5·5 per cent. is that the married woman's option contribution has been more than trebled, from 0·6 per cent. to 2 per cent. if she continues to exercise the option. With the greatest respect, the Minister's figures on that dragged in yet again the effect of taking away the Boyd-Carpenter contributions, which is not too surprising, as the benefit is being totally abolished. The hon. Gentleman cannot possibly try to avoid the implications of the fact that the Government are more than trebling the contribution for married women.
The Government have a case and we know what it is, but they will not put it forward frankly. They want to abolish the married woman's option and are moving towards doing so. That is why they have trebled this percentage. There is no point in their hiding their case. They should not wriggle away and hide among the figures but should clearly state why they want to abolish the option. They cannot hide it in the Bill, because Clause 2(4) gives appallingly open-ended discretion to the Secretary of State to interfere


with the option. We will want to raise that in Committee.
I want to deal briefly with the campaign to end the option. I have found, as many other hon. Members must have found, that many feminist organisations, for lack of a better phrase, have been deceived into believing that this policy is some kind of progressive step towards the emancipation of women. I regret to find that many of them take a superficial look and believe that the apparent step towards parity of treatment is a step towards equality.
This is a gross misunderstanding. Feminist organisations which take that view are allowing women in work to be fiddled by the changes which are to be made. Many of us who believe in the emancipation of women and who like to think that equal treatment should be automatic in modern circumstances in the process of government nevertheless believe that there is a genuine case for the married woman's option to pay a reduced rate.
Three out of four married women at the moment pay that reduced rate. Looked at from their interest as working women and calculated on a financial basis, they are quite right to exercise that option. It is a bad bargain for most married women to pay a full national insurance contribution. The simplest example is that of pensions. A married woman is entitled on her husband's contribution to £6 of pension even if she never goes to work. If a woman contributes for her entire working life she will get only a £10 single person's pension in her own right but is not entitled to that in addition to the married woman's pension of £6 on her husband's contribution. Married women contribute through their working life for an extra £4 only, and if they pay the same contribution as a working man he gets £10 pension and they get only £4 in addition to what they would get on their husband's contributions. The only women to whom it is usually and obviously an advantage to pay a full contribution are women who are older than their husbands, when there can be advantages in getting the single pension much earlier.
Possibly there is a second reason why the Department wants to move towards doing away with the option. It is that

married women could be a valuable source of revenue, a useful way of subsidising the other people in the scheme, if more of them were to pay an increased contribution. The result is that we think it is not so apparently equal as it is made to appear that the married woman's option is envisaged to be abolished.
The immediate effect of the Government's sidling towards its abolition in the Bill is to make a great deal of difference to the position of married women compared with their position under our Act. Under the 1973 Act a woman earning £20 a week would pay 12p. Now, under these proposals she will pay 40p. Under the 1973 Act a woman earning £69 would pay 29p a week, which the Bill will put up to £1·38. That is a swingeing increase, and there will be no increase in benefit. By exercising the option, women get only the National Health Service and industrial injury benefit there will be no improvement in pensions for them at all. That is an increase from 29p to £1·38 each week for the worst affected category of women.
There is an even worse case than that, and that is the position of the self-employed, where again the Government have made a pig's ear of the way they have tried to distribute the burden in the Bill. In the debate in July we warned of the outrage that this particular group would feel once they began to realise what was proposed for them. I should think that all hon. Members, in all parts of the House, now know from the lobbying they have had that that warning has proved right. It has been described by many hon. Members, including my hon. Friend the Member for Basingstoke (Mr. Mitchell) and others, as a wide-ranging group.
It worries one, in a way, that it turned out that the category that we were most troubled about was Members of Parliament and that we were not aware of our precise position under this legislation, which turns out by chance to be that we shall cease to be self-employed in April next year. But worse consequences will hit the rest of the self-employed, such as shopkeepers, window-dressers, the professions, translators and parsons. Those who have premises and those who are businessmen are badly hit by rates from which they have had no relief, and they


are badly hit by increases in personal taxation as well.
That is the particular body whose position I want to analyse in detail. There is no longer tax relief on national insurance contributions. Therefore, when they look at the extra increases in the pipeline for them on national insurance contributions, they know that they will have to pay them out of taxed income, and they have to earn that much more to pay for the increases.
The Secretary of State, and perhaps the Under-Secretary if he is tempted to imitate, cannot retreat into what are, with respect, colouring points. The earnings bracket for the graduated contributions is up, and quite rightly so—it was always envisaged to be so—from £1,150—£2,500, to £1,600—£3,500 now. For the sake of argument I shall accept that the Government have that calculation right and that it remains roughly in the same relationship to average national earnings. At the same time, however, what we are dealing with again is the percentage increase. That is not, for self-employed persons, up by a mere quarter of 1 per cent. The percentage is up from 5 per cent. to 8 per cent. and it has a very dramatic effect.
I should like to give the figures as clearly as I can, because the Minister of State clearly evaded interventions from my hon. Friend the Member for Brentwood and Ongar when he tried to tie him down. They agreed that they were both simple men, as certainly I am. The actual impact in money terms of what we are doing to the self-employed—the House must have this point brought home to it—is that in February 1974. when the Conservatives left office, all self-employed people paid £1·99. In August 1974 that payment rose to £2·41 each week. Our 1973 Act would have reduced the £1,600-a-year man's payment to £2·11 and would have put those above £2,500 up to £2·98. I admit that these are crude figures. This Bill takes the £2,500-a-year man up to £3·79 and the £3,600-a-year man up to £5·49.
I want to dwell on the enormity of the position of the man earning £3,600 a year; he is not a poor man, but that is by no means a king's ransom. If he is a shopkeeper earning that sort of money,

from paying £1·99 each week in February of this year he will be going up to £5·49 each week in April next year. Taking slightly lower figures, the self-employed person on £2,500 each year is going up from £1·99 in February of this year to £3·79 in April next year. At the same time, over that same period, the payment of the employed man receiving £40 a week—that is equivalent to the last case I have mentioned—is going up from £2·15 to £2·21. He will be paying another 6p over the same period. That is the discrepancy that the Government have allowed to come in.
These sudden, swingeing increases in taxation, on any category of people, are utterly wrong in principle. They are quite out of line with the modest increase from 5·25 per cent. to 5·5 per cent. All self-employed persons, in one year, are going from paying less than the equivalent person in employment to paying substantially more.
We said that there was a difficult problem in comparing the contributions of the self-employed with those of the employed sector, because in theory—quite correctly, in a way—one has to look at the employer's contribution as well when one looks at the person in employment. I accept that it can be argued that the self-employed have been treated comparatively well over the years and have got themselves into a position of advantage. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) dealt with this point in opening. If such theoretical arguments are introduced and if they have merit, one sudden hike in one year to put them back into a position of equivalence is quite wrong.
We must face the reality. It is a reality made stronger now that we are going over to graduated contributions. These payments are increasingly felt to be, and argued to be, personal taxation on the individuals paying them. I should have thought not only that it is the Scottish Nationals, the Ulster Unionists and the Conservatives that can agree but that across the House we can agree that sudden and dramatic increases for particular categories in personal taxation are highly undesirable in principle, particularly when the unfairness of the situation can be illustrated by the fact that the better-off window cleaner will find that he will be paying more from his earnings


in national insurance contributions than those engaged in middle management.
I will illustrate again how bad the comparison is. The worst effect that will arouse the most dramatic public feelings is the enormous change which is to take place in April 1975. There will be a sudden increase next year. Suddenly in one week people will find that they are paying much more. The employed man on £69 a week is the worst affected: he will pay 39p more each week from April of next year. In the light of pension increases, I do not expect that he will be very excited about that. The self-employed man on £3,600 a year—the equivalent man—will pay £3·08 a week more as an overnight increase in his contribution. If there is meant to be some equity in the Government's sharing of the burden of increased social security benefits, why are the self-employed chosen to have the broadest backs? As several of my hon. Friends have said, we can only infer from these grotesque figures that there are, perhaps sub-consciously, motives of prejudice in members of the Labour Party.
I repeat that the worst-affected category is the band on £69 a week, or £3,600 a year, if self-employed. Let us look at the big discrepancy at that level and bear in mind as a purely random example that that is about the earnings level of a coalface worker in the mining industry. Here we come to the nub of why the burden has been distributed in this way. I ask my right hon. and hon. Friends to try to picture Members of the Labour Party going to a coalface worker and telling him that next week his national insurance contribution was to rise by £3. There is not a chance that a Labour Party Member would act in that way. The Labour Party is not prepared to propose those increases to useful people in the industrial trade unions. Those increases are being reserved for the self-employed. We say that those increases should not be demanded of any section, but a particularly vulnerable section has been chosen.

Mr. George Cunningham: The hon. Gentleman has some responsibility for what we are now legislating. Is he claiming that the benefits which the self-employed will derive in future from the scheme will be lower than the contributions which they will pay into the scheme,

or is his objection based purely on the ground that the jump is too rapid in one stage?

Mr. Clarke: The actual benefits they receive are restricted, as they are to all the self-employed vis-à-vis the employed. My objection is to the sudden increase in the sharing out of the overall burden which leads to this great discrepancy between the increase demanded of self-employed people and the increase demanded of employed persons. The comparison is dramatic.
The group who are being singled out, because the Labour Party will not single out industrial workers, are a particularly vulnerable group in an inflationary year. On top of the rate increases and personal taxation increases, these changes threaten ruin for small shopkeepers as an obvious category of people. We warned in the debate in July that the outrage that would greet these increases when people really became aware of them in April 1975 would rival the ratepayers' revolt earlier this year. It seems likely that it may coincide with another ratepayer's revolt at about this time next year in any event.
It seems to me and to many of my hon. Friends, all of whom have warned the Government, that there is a serious risk of Poujadism, to quote an hon. Member opposite, and of the rage in these groups burning to an extreme extent when they find the burden placed upon them in April next year. We spelt out all our warnings on 1st July, and a great deal of time has gone by. So far the Government have been completely heedless and have come back with an identical Bill. We want to do all we can as an Opposition to force the Government to rethink and spread the burden fairly. Our arguments were not persuasive in July. They have been reinforced this evening. We intend to reinforce our feelings by dividing the House on our reasoned amendment against the Bill. We are confident that we have the legitimate interests of a worthwhile section of the community in mind when we press the matter to a Division.

9.32 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Alec Jones): Like the hon. Member for Rushcliffe (Mr. Clarke), I begin by following the pleasant custom of congratulating the


two maiden speakers who took part in tonight's debate, and I do so for the first time from this Dispatch Box. It is somewhat appropriate that they are truly "maiden" maiden speakers. [Interruption.] Perhaps I should say that on the assumption that all gentlemen in this House are honourable Gentlemen, all ladies here are honourable Ladies.
I congratulate the hon. Lady the Member for Dunbartonshire, East (Mrs. Bain). Some of us have appreciated her charm as she has walked up and down the corridors in the past fortnight. Having heard her speak, I am certain that many of us were impressed by her sincerity when she spoke on matters affecting the well-being of her constituents. She did not adhere to the convention of being non-controversial. In fact, she tried to do my right hon. Friend the Secretary of State for Scotland out of a job. Perhaps I had better not say too much on that subject at the moment. However, in all honesty I can say that I am sure that all who heard her enjoyed her contribution and that we all look forward, as one of my hon. Friends said, to hearing her—but not too often.
Then we heard the maiden speech of my hon. Friend the Member for Sheffield, Brightside (Miss Maynard), who told us that there were more women workers in her constituency than in any other. I have never counted the women workers in my constituency and I will give her that point, but I should have thought that her speech indicated that the women workers in Brightside have been increased in numbers by one since she represented that constituency. We have known her as a valiant fighter for farm workers and others in another capacity before she came to this House. I am sure we all appreciate the sincerity and determination with which she expressed her concern about the rights and problems of her new constituency. I certainly hope that we shall hear my hon. Friend often, and for as long as she cares to make it.
Perhaps I might add that one reason which gives me ground for confidence that we shall have at least my hon. Friend's support on the Bill tonight is that, according to the figures I have seen, agricultural workers, who have to exist, as she put it, on about £25 a week, will be 27p a week better off as a result of

the Bill and the decrease in their national insurance contributions.
I must say a word now to the hon. Member for Rushcliffe. We have sat opposite one another both in this Chamber and in Committee rooms many times and discussed various aspects of national insurance. I was very grateful to him for his kind words about me. I realise that in the past, because of his previous duties, he has often had to be silent on national insurance matters, but I welcome his contribution today. I did not agree with much of it. I agreed with the nice beginning, and I think I agreed when he sat down, but in between we came to a minor parting of the ways. However, I thank the hon. Gentleman sincerely. I express my gratitude also to the hon. Member for Brentwood and Ongar (Mr. McCrindle), who is threatening us with some awkward votes on subsequent social security questions.
In many ways, I stand at this Dispatch Box today feeling rather like a poacher turned gamekeeper. Having been present at or taken part in almost every debate on social security since I came to the House in 1967, I hope to be as vigilant now as gamekeeper as I strove to be active as poacher.
Our debate today is reminiscent of a television repeat of an old film. We have heard all the major arguments put forward. Those arguments were answered point by point by my hon. Friend the Minister of State in our debate on 1st July, and they have been answered again today. Once again we have had the criticisms, which have become slightly more strident as the months have passed from July to November. I shall try to deal with some of the points, but I am sure that most hon. Members will agree that many of the detailed questions are rightly matters for the Committee, which is likely to turn out to be an extremely interesting Committee. My hon. Friend the Member for Newham, North-West (Mr. Lewis) made a plea for simplicity and suggested that he would be helped if some easily understandable figures were provided. He has my sympathy. I have never found statistics in social security matters particularly easy to handle. Hence, I fear that the Committee which will have to deal with the details is likely to be something of a statistical nightmare.
If we want higher benefits, if we want better benefits, if we want new benefits, we have to accept that they must be paid for and that they have to be paid for by those best able to pay. This is a matter of political judgment. It is a matter of some political controversy and disagreement. But our view is that the Bill strikes about the right balance of contributions among employers, employees, self-employed and women in employment, bearing in mind the benefits which those groups receive.
In social security matters there are two irreconcilables—benefits and contributions. While we would all like to have the highest benefits with the lowest contributions, we have to be realistic. To propose increases in benefits without indicating where the money is to come from to pay for them is an easy proposition but a dangerous one because it raises false hopes among the people in real need. Similarly, to propose a reduction in any one contribution, as some hon. Member have done today, without saying which benefits should be cut back or which contribution should be increased is bordering on cowardice, if not something infinitely worse.
It seems crazy to talk of the contributions being too high unless one is able to explain where the finance would come from if the contribution were cut. Higher national insurance contributions provided for in the Bill will yield about £4,790 million in 1976–77. That sum is vital if we are to fulfil our commitment to increase benefits.
My right hon. Friend the Secretary of State made a statement last March in which she spoke of the pension increases which took effect on 22nd July. All hon. Members welcomed the increased level of benefits. At the same time my right hon. Friend clearly indicated that those benefits would have to be paid for. She said:
If the new structure and level of contributions provided by the Social Security Act 1973 were to come into force in April 1975, the income of the National Insurance Fund would not be sufficient to finance an uprating of the basic pension on the generous scale we propose.
Later she added:
We intend to introduce legislation later in the year to secure income to the National Insurance Fund which will still be adequate to the new levels of benefit after April 1975."—

[OFFICIAL REPORT, 27th March 1974; Vol. 871, c. 453–4.]
That is what the Bill is all about. We are finding the money to pay for the benefits which the House approved and which all hon. Members have supported at one time or another. In view of the support these increases have commanded and in view of my right hon. Friend's clear indication that the increased contributions would be necessary, I find the turn-about of the Conservatives surprising.
If we were talking merely about benefits—

Sir G. Howe: The hon. Gentleman is presenting a naive argument with characteristically attractive naivety. The Secretary of State in her statement said that there were to be increases in contributions. We accept that, and we have made it plain that we accept it. But the legitimate point upon which we quarrel is the distribution of the contributions. I hope the hon. Gentleman will tell his right hon. Friend that if she had been present throughout the debate she would have heard a number of alternative suggestions put forward. What the Government are proposing amounts to a wrongly distributed load.

Mr. Jones: I have previously made the point that we are involved with a question of distribution. That has been a matter of political judgment and of disagreement between us. But I do not believe that any hon. Member who has spoken in the debate and who has criticised what we are now proposing has categorically stated an alternative way of raising the money. There have been all sorts of suggestions, and I look forward to the Committee stage when perhaps Opposition Members will tell us how they think the new benefits should be financed.
I shall now try to deal with one or two smaller points raised during the debate before going on to the two major issues. A domestic element is involved. I have in mind, for instance, the point made by my hon. Friend the Member for Newham, North-West. Not being well conversant with income tax regulations I was rather taken aback by the point made by my hon. Friend, but it is true that Members of Parliament will be class 1 contributors from April 1975. I say this because of the confusion that has been


caused. Members of Parliament will be class 1 contributors because they are office-holders who pay taxes through PAYE and because this was laid down in the 1973 Act. It was, apparently, preceded by consultation.
This position will not arise in relation to other people mentioned by my hon. Friend the Minister of State, but I understand that each case has to be judged on its merits. There is provision that the situation will depend largely on the contract of employment and on the terms of that contract.
Another hon. Member referred to the position of ministers of religion. I understand that this matter is still under discussion.

Mr. Arthur Lewis: I am obliged to my hon. Friend for confirming what I had at first thought was the position. Should other people who may feel that they have a special case for consideration make approaches to my hon. Friend's Department before the Bill goes through the Committee stage? Would it be too late for them to make approaches afterwards, or does my hon. Friend suggest that they make approaches officially as soon as possible?

Mr. Jones: On all these issues, any individual who feels that he may be affected by this or by any other legislation relating to social security should visit his local office of the Department, where he can get the necessary application forms and so on.

Mr. Kenneth Lomas: I hope that it will be borne in mind by the Government Front Bench that it should not be taken for granted on this side of the House that all self-employed people are necessarily rich. I am not going to speak of Members of Parliament in this context, but I have in mind, for instance, vicars and people who run small corner shops. We have a responsibility as a Government to be fair, and we should not think in terms of the self-employed being recognised as people we can milk.

Mr. Jones: I am grateful to my hon. Friend for that intervention, but steps that we are proposing in the Bill will ensure that among the self-employed those with the lowest income will have the smallest increases in contributions.
I turn now to the question of the self-employed. It is a vexed question that arouses a great deal of heat and excitement. I say to the hon. Member for Brentwood and Ongar and other hon. Members that I do not dissent from their glowing tributes to the self-employed in which they used terms like "hardworking" and "industrious". [Interruption.] That is a lot kinder than the hon. Gentleman was to employed persons. If one says that the self-employed are hardworking and industrious, without any reference to the others, the implication is that the others are infinitely less so.
It was also suggested that Labour Members are vindictive and hostile to self-employed people. There are self-employed people living in our constituencies as well as those of Conservative Members. It is in our interests to look after them. To suggest that we are deliberately hostile to them was not only nonsense but was to play politics, forgetting that the election is over and that this side won.

Mr. McCrindle: If the Minister and the Government were not being hostile to the self-employed, why, having given a Second Reading in the last Parliament to a Bill introducing large and wide-ranging increases to be paid by the self-employed, did they decide, with an election on the horizon, that the best thing they could do was to refrain from taking the Bill to Committee and reintroduce it in the next Parliament?

Mr. Jones: Anyone who believes that will believe anything.
There are bound to be differences between us on the question, which we will resolve. But a great deal of the criticism is ill-informed and much is completely inaccurate.
The fears of the National Federation of Self Employed were mentioned. Most hon. Members have received a letter in which the federation says:
In a little over a year this"—
the self-employed contribution—
has been increased by over 100 per cent. to £2·41 weekly.
That is nonsense. It does not do the case any good when people exaggerate like that. In 1972 the self-employed contribution was £1·68, in 1973 it was £1·99 and in 1974 it was £2·41. Between 1973 and 1974 the increase was 21 per cent.,


and at the maximum, from 1972 to 1974, the increase was 43 per cent. I ask all hon. Members not to accept the points so easily made in such literature.
When the 1948 Beveridge scheme was introduced, the self-employed paid a contribution which was 70 per cent. of the combined class 1 rate. In strict actuarial terms, to pay for the benefits they were to receive—they were denied certain benefits—that contribution should have been 90 per cent. It was deliberately set lower. Over the years it fell to 40 per cent. The Bill restores it to about 65 per cent. From April 1975 the combined class 1 rates will be 14 per cent. of earnings—that is, with the 5·5 per cent. and the 8·5 per cent. The combined class 2 and class 4 rate is equivalent to about 8 per cent. on self-employed earnings of £30 a week and above.
If the original Beveridge ratio were applied, the self-employed would have to pay 9·8 per cent. in April 1975 instead of the 8 per cent. that we propose in the Bill. The April 1975 charges bear more heavily on the self-employed man than on the employed man because since 1961 the employed have had to pay graduated contributions to finance higher pensions while the self-employed have paid flat-rate contributions only. The increases in flat-rate class 2 contributions have not maintained the original 70 per cent. ratio.
The proposals in the Bill show that, far from being discriminated against, the self-employed are still not back to the 70 per cent. contribution which the Beveridge scheme introduced.
The other point of major disagreement is the earnings band. The suggestion has been made that the Conservatives would have kept the present band of £1,150 to £2,500 instead of our proposal of £1,600 to £3,600. That clearly is not so. Throughout the Committee proceedings the hon. Member for Somerset, North (Mr. Dean) clearly indicated that the figures were illustrative and would have

to be revised. On 25th January in Committee the hon. Gentleman said:
I reiterate that the Government have declared their intention that the upper contribution limit in the new scheme should broadly correspond to one and a half times national average earnings."—[OFFICIAL REPORT, Standing Committee E, 25th January 1973; c. 279.]
That is virtually what we have done.
I understood that the right hon. and learned Gentleman wished to retain the percentage contribution of 5 per cent. He was thus tending to accept the suggestion that the band should be raised from £1,600 to £3,600. As a consequence he would find himself having to accept an increase of flat-rate contribution from £2·41 to £2·70. If those premises are right, that is the difference between our proposals and the proposals that the right hon. and learned Gentleman would have to bring to the House. A self-employed man with earnings of £11 a week under our proposals would pay £2·41 and under the proposals of the Opposition would pay £2·70. If we move to the other end of the scale, the self-employed man on £69 a week under the our proposals would pay £5·49 and under the proposals of the Opposition £4·62. That is a saving of 87p. That does not represent a massive, swingeing increase, which the Opposition have suggested.
We have been told by the Opposition that they will vote against the Bill. We have been told that the Liberal Party will join them. This Bill is the same Bill which the then hon. Member for Hazel Grave, Dr. Winstanley, described in July. He said:
the vote will be a formality because the Bill deals only with the basic pension…To that extent the Bill is non-controversial."—[OFFICIAL REPORT, 1st July 1974; Vol. 876, c. 65.]
It is the same Bill tonight. The only change is that we won the election and the Conservative and Liberal Parties did not.

Question put, That the amendment be made:

The House divided: Ayes 274, Noes 291.

Division No. 4.]
AYES
[10.0 p.m.


Alison, Michael
Bell, Ronald
Body, Richard


Arnold, Tom
Bennett, Sir Frederic (Torbay)
Boscawen, Hon Robert


Atkins, Rt Hn H. (Spelthorne)
Bennett, Dr Reginald (Fareham)
Bowden, Andrew (Brighton)


Awdry, Daniel
Benyon, W. R.
Boyson, Dr Rhodes (Brent)


Bain, Mrs M.
Berry, Hon. Anthony
Braine, Sir Bernard


Baker, Kenneth
Biffen, John
Brittan, L.


Banks, R. G.
Biggs-Davison, John
Brotherton, Michael


Beith, A. J.
Blaker, Peter
Brown, Sir Edward (Bath)




Bryan, Sir Paul
Holland, Philip
Penhaligon, David


Buchanan-Smith, Alick
Hooson, Emlyn
Percival, Ian


Buck, Antony
Hordern, Peter
Peyton, Rt Hon John


Budgen, N.W.
Howe, Rt Hon Sir Geoffrey
Pink, R. Bonner


Bulmer, J. E.
Howell, David (Guildford)
Powell, Rt Hon J. Enoch


Burden, F. A.
Howells, Geraint (Cardigan)
Price, David (Eastleigh)


Butler, Adam (Bosworth)
Hurd, D.
Prior, Rt Hon James


Carlisle, Mark
Hutchison, Michael Clark
Pym, Rt Hon Francis


Carson, John
Irvine, Bryant Godman (Rye)
Rathbone, T.


Chalker, Mrs Lynda
Irving, Charles (Cheltenham)
Rawlinson, Rt Hon Sir Peter


Churchill, W. S.
James, David
Rees, Peter (Dover &amp; Deal)


Clark, Alan (Plymouth S)
Jenkin, Rt Hon Patrick (Redbr)
Rees-Davies, W. R.


Clark, William (Croydon S)
Jessel, Toby
Reid, George


Clarke, Kenneth (Rushcliffe)
Johnson Smith, G. (E Grinstead)
Renton, Rt Hn Sir D. (Hunts)


Clegg, Walter
Jones, Arthur (Daventry)
Renton, Tim (Mid-Sussex)


Cockcroft, J. H.
Jopling, Michael
Ridley, Hon Nicholas


Cooke, Robert, (Bristol W.)
Joseph, Rt Hon Sir Keith
Ridsdale, Julian


Cope, J. A.
Kaberry, Sir Donald
Rifkind, Malcolm


Cordle, John
Kellett-Bowman, Mrs. Elaine
Roberts, Michael (Cardiff NW)


Cormack, Patrick
Kershaw, Anthony
Roberts, Wyn (Conway)


Corrie, John
Kilfedder, James
Rodgers, Sir John (Sevenoaks)


Costain, A. P.
Kimball, Marcus
Ross, William (Londonderry)


Crawford, Douglas
King, Evelyn (South Dorset)
Rossi Hugh (Hornsey)


Critchley, Julian
King, Tom (Bridgwater)
Rost, Peter (S.E. Derbyshire)


Crouch, David
Kitson, Sir Timothy
Royle, Sir Anthony


Crowder, F. P.
Knight, Mrs Jill
Sainsbury, Tim


Davies, Rt Hon J. (Knutsford)
Knox, David
St. John-Stevas, Norman


Dean, Paul (N Somerset)
Lamont, Norman
Scott, Nicholas


Dodsworth, G. H.
Lane, David
Shaw, Giles (Pudsey)


Douglas-Hamilton, Lord James
Langford-Holt, Sir John
Shelton, William (Lambeth, St)


Drayson, Burnaby
Latham, Michael (Melton)
Shepherd, Colin


du Cann, Rt Hon Edward
Lawrence, I.
Shersby, Michael


Durant, Tony
Lawson, Nigel
Silvester, F.


Dykes, Hugh
Le Marchant, Spencer
Sims, Roger


Eden, Rt Hon Sir John
Lester, Jim (Beeston)
Sinclair, Sir George


Edwards, Nicholas (Pembroke)
Lewis, Kenneth (Rutland)
Skeet, T. H. H.


Elliott, Sir William
Lloyd, Ian (Havant)
Smith, Cyril (Rochdale)


Emery, Peter
Loveridge, John
Smith, Dudley (Warwick)


Eyre, Reginald
Luce, Richard
Speed, Keith


Fairbairn, Nicholas
McAdden, Sir Stephen
Spence, John


Farr, John
MacCormick, Iain
Spicer, James (W Dorset)


Fell, Anthony
McCrindle, Robert
Spicer, Michael (S Worcester)


Finsberg, Geoffrey
McCusker, Harold
Sproat, Iain


Fisher, Sir Nigel
Macfarlane, Neil
Stanbrook, Ivor


Fletcher, Alex (Edinburgh N)
MacGregor, John
Stanley, John


Fletcher-Cooke, Charles
McNair-Wilson, M. (Newbury)
Steel, David (Roxburgh)


Fookes, Miss Janet
McNair-Wilson, P. (New Forest)
Steen, Anthony (Liverpool)


Fowler, Norman (Sutton C)
Marshall, Michael (Arundel)
Stewart, Donald (Western Isles)


Fox, Marcus
Marten, Neil
Stewart, Ian (Hitchin)


Fraser, Rt Hon H. (Stafford &amp; St)
Mates, Michael
Stokes, John


Freud, Clement
Mather, Carol
Tapsell. Peter


Fry, Peter
Maude, Angus
Trylor, R. (Croydon N.W.)


Galbraith, Hon T. G. D.
Mawby, Ray
Taylor, Teddy (Glasgow, C)


Gardiner, George (Reigate)
Maxwell-Hyslop, Robin
Tebbit, Norman


Gardner, Edward (S Fylde)
Mayhew, Patrick
Temple-Morris, P.


Gilmour, Sir John (East Fife)
Meyer, Sir Anthony
Thatcher, Rt Hon M.


Glyn, Dr Alan
Miller, Hal (Bromsgrove)
Thomas, Rt Hon P. (Barnet)


Goodhart, Philip
Mills, Peter
Thompson, G.


Goodhew, Victor
Miscampbell, Norman
Thorpe, Rt Hon Jeremy (Devon)


Goodlad, A.
Mitchell, David (Basingstoke)
Townsend, Cyril D.


Gorst, John
Moate, Roger
Trotter, Neville


Gow, I. (Eastbourne)
Molyneaux, James
Tugendhat, Christopher


Gower, Sir Raymond (Barry)
Monro, Hector
Vaughan, Dr Gerard


Grant, Anthony (Harrow C.)
Montgomery, Fergus
Viggers, P. J.


Gray, Hamish
Moore, John (Croydon C.)
Wainwright, R. (Colne Valley)


Grieve, Percy
More, Jasper (Ludlow)
Wakeham, John


Griffiths, Eldon
Morgan, Geraint
Walder David (Clitheroe)


Grimond, Rt Hon J.
Morgan-Giles, Rear-Admiral
Walker Rt Hon P. (Worcester)


Grist, Ian
Morris, Michael (Northants)
Wall, Patrick


Grylls, Michael
Morrison, Charles (Devizes)
Walters, Dennis


Hall, Sir John
Morrison, Peter (Chester)
Warren, Kenneth


Hall-Davis, A. G. F.
Mudd, David
Watt, Hamish


Hamilton, Michael (Salisbury)
Neave, Airey
Weatherill, Bernard


Hampson, Dr. Keith
Nelson, Anthony
Whitelaw, Rt Hon William


Hannam, John
Neubert, M.
Wiggin, Jerry (Weston-s-Mare)


Harrison, Sir Harwood (Eye)
Newton, A.
Wilson, Gordon (Dundee E)


Harvie Anderson, Rt Hn Miss
Nott, John
Winterton, Nicholas


Hastings, Stephen
Onslow, Cranley
Wood, Rt Hon Richard


Havers, Sir Michael
Oppenheim, Mrs Sally
Young, Sir George (Ealing)


Hawkins, Paul
Osborn, John
Younger, Hon George


Hayhoe, Barney
Page, Rt Hon R. Graham (Crosby)



Heath, Rt Hon Edward
Page, John (Harrow West)
TELLERS FOR THE AYES:


Heseltine, Michael
Paisley, Rev Ian
 Mr. John Stradling Thomas and Mr. Cecil Parkinson.


Hicks, Robert
Pardoe, John



Higgins, Terence L.
Pattie, Geoffrey








NOES


Abse, Leo
Evans, Ioan L. (Aberdare)
McCartney, Hugh


Allaun, Frank
Evans, John (Newton)
McElhone, Frank


Anderson, Donald
Ewing, Harry (Stirling)
MacFarquhar, R.


Archer, Peter
Faulds, Andrew
McGuire, Michael (Ince)


Armstrong, Ernest
Fernyhough, Rt Hon E.
Mackenzie, Gregor


Ashley, Jack
Fitch, Alan (Wigan)
Madden, Max


Ashton, Joe
Fitt, Gerard (Belfast)
Magee, Bryan


Atkins, Ronald (Preston N.)
Flannery, Martin
Mahon, Simon


Bagier, Gordon A. T.
Fletcher, Raymond (Ilkeston)
Mallalieu, J. P. W.


Barnett, Guy (Greenwich)
Fletcher, Ted (Darlington)
Marks, Ken


Barnett, Joel (Heywood)
Foot, Rt Hon Michael
Marquand, David


Bates, Alf
Ford, Ben T.
Marshall, Dr Edmund (Goole)


Benn, Rt Hn Anthony Wedgwood
Forrester, John
Marshall, Jim (Leicester S)


Bennett, A. (Stockport North)
Fowler, Gerald (The Wrekin)
Mason, Rt Hon Roy


Bidwell, Sydney
Fraser, John (Lambeth N)
Maynard, Miss Joan


Bishop, Edward
Freeson, Reginald
Meacher, Michael


Blenkinsop, Arthur
Garrett, W. (Wallsend)
Mellish, Rt Hon Robert


Boardman, H.
George, Bruce
Mendelson, John


Booth, Albert
Gilbert, Dr John
Mikardo, Ian


Boothroyd, Miss Betty
Ginsburg, David
Miller, Dr M. (E. Kilbride)


Bottomley, Rt Hon Arthur
Gould, Bryan
Miller, Mrs Millie (Redbridge)


Boyden, James (Bish Auck)
Gourlay, Harry
Molloy, William


Bradley, Tom
Graham, Ted
Moonman, Eric


Bray Dr Jeremy
Grant, George (Morpeth)
Morris, Alfred (Wythenshawe)


Brown, Hugh D. (Glasgow, Pr)
Grant, John (Islington C.)
Morris, Charles R. (Openshaw)


Brown, Robert C. (Newcastle)
Grocott, Bruce
Mulley, Rt Hon Frederick


Brown, Ronald (Hackney S)
Hamilton, James (Bothwell)
Murray, Ronald King


Buchan, Norman
Hamilton, W. W. (Central Fife)
Newens, S.


Buchanan, Richard
Hamling, William
Noble, Mike


Butler, Mrs Joyce (Haringey)
Hardy, Peter
Oakes, Gordon


Callaghan, Rt Hon J. (Cardiff S)
Harper, Joseph
Ogden, Eric


Callaghnn, Jim (Middleton &amp; P)
Harrison, Walter (Wakefield)
O'Halloran, Michael


Campbell, Ian
Hattersley, Roy
O'Malley, Brian


Canavan, Dennis
Hatton, Frank
Orbach, Maurice


Cant, R. B.
Hayman, Mrs Helene
Orme, Rt Hn Stanley


Carmichael, Neil
Healey, Rt Hon Denis
Ovenden, J.


Carter-Jones, Lewis
Heffer, Eric S.
Owen, Dr David


Cartwright, John
Hoolay, Frank
Padley, Walter


Castle, Rt Hon Barbara
Horam, John
Palmer, Arthur


Clemitson, I. M.
Howell, Denis (B'ham Sm H)
Park, G.


Cocks, Michael (Bristol S)
Hoyle, Douglas (Nelson)
Parker, John


Cohen, Stanley
Huckfield, Leslie
Parry, Robert


Coleman, Donald
Hughes, Rt Hon C. (Anglesey)
Perry, Ernest


Colquhoun, Mrs Maureen
Hughes, Mark (Durham)
Phipps, Dr C.


Conlan, Bernard
Hughes, Robert (Aberdeen N)
Prescott, John


Cook, Robin F. (Edin. C.)
Hughes, Roy (Newport)
Price, C. (Lewisham W.)


Corbett, Robin
Hunter, Adam
Price, William (Rugby)


Cox, Thomas (Wands Toot)
Irvine, Rt. Hon Sir A. (L'pool)
Radice, Giles


Craigen, J. M. (Glasgow, M)
Irving, Rt Hon S. (Dartford)
Richardson, Miss Jo


Crawshaw, Richard
Jackson, Colin (Brighouse)
Roberts, Albert (Normanton)


Cronin, John
Jackson, Miss Margaret (Lincoln)
Roberts, Gwilym (Cannock)


Cryer, G. R.
Janner, Greville
Robertson, John (Paisley)


Cunningham, G. (Islington S)
Jay, Rt Hon Douglas
Roderick, Caerwyn


Cunningham, Dr J. (Whiteh)
Jeger, Mrs Lena
Rodgers, George (Chorley)


Dalyell, Tam
Jenkins, Hugh (Wandsworth)
Rodgers, William (Teesside)


Davidson, Arthur
John, Brynmor
Rooker, J. W.


Davies, Bryan (Enfield N)
Johnson, James (Kingston W)
Roper, John


Davies, Denzil (Llanelli)
Jones, Barry (East Flint)
Rose, Paul B.


Davies, Ifor (Gower)
Jones, Dan (Burnley)
Ross, Rt Hon W. (Kilm'nock)


Davis, S. Clinton (Hackney C)
Jones, Alec (Rhondda)
Rowlands, Ted


Deakins, Eric
Kaufman, Gerald
Ryman,John


Dean, Joseph (Leeds West)
Kelley, Richard
Sandelson, Neville


de Freitas, Rt Hon Sir Geoffrey
Kerr, Russell
Sedgemore, B.


Delargy, Hugh
Kilroy-Silk, Robert
Selby, Harry


Dell, Rt Hon Edmund
Kinnock, Neil
Shaw, Arnold (Redbridge, Ilf)


Dempsey, James
Lambie, David
Sheldon, R. (Ashton-u-Lyne)


Doig, Peter
Lamborn, Harry
Short, Mrs R. (Wolv NE)


Dormand, Jack
Lamond, James
Silkin, Rt Hn S. C. (Southwk)


Douglas-Mann, Bruce
Latham, Arthur (Paddington)
Silkin, Rt Hn John (Lewish)


Duffy, A. E. P.
Leadbitter, Ted
Sillars, James


Dunlop, J.
Lee, John
Silverman, Julius


Dunn, James A.
Lestor, Miss J. (Eton &amp; Slough)
Skinner, Dennis


Dunnett, Jack
Lever, Rt Hn Harold
Small, William


Dunwoody, Mrs G. P.
Lewis, Arthur (Newham N.)
Smith, John (N Lanarkshire)


Eadie, Alex
Lewis, Ron (Carlisle)
Snape, Peter


Edelman, Maurice
Lipton, Marcus
Spearing, Nigel


Edge, Geoffrey
Litterick, Tom
Spriggs, Leslie


Edwards, Robert (Wolv SE)
Lomas, Kenneth
Stallard, A. W.


Ellis, John (Brigg &amp; Scun.)
Loyden, Eddie
Stoddart, David


Ellis, Tom (Wrexham)
Luard, Evan
Slott, Roger


English, Michael
Lyon, Alexander (York)
Strang, Gavin


Evans, Fred (Caerphilly)
Lyons, Edward (Bradford W.)
Strauss, Rt Hon G. R.


Evans, Gwynfor (Carmarthen)
Mabon, Dr J. Dickson
Summerskill, Hon Dr Shirley







Swain, Thomas
Walden, Brian (B'ham, L'dyw'd)
Williams, A. L. (Havering)


Taylor, Mrs Ann (Bolton W)
Walker, Harold (Doncaster)
Williams, Rt Hn Mrs S. (Hertford)


Thomas, Dafydd (Merioneth)
Walker, Terry (Kingswood)
Williams, W. T. (Warrington)


Thomas, Jeffrey (Abertillery)
Ward, Michael
Wilson, Alexander (Hamilton)


Thomas Mike (Newcastle)
Watkins, David
Wilson, Rt Hon H. (Huyton)


Thomas, Ron (Bristol NW)
Watkinson, John
Wilson, William (Coventry SE)


Thorne, S. G. (Preston)
Weetch, Ken
Wise, Mrs. Audrey


Tierney, Sydney
Weitzman, David
Woodall, A.


Tinn, James
Wellbeloved, James
Woof, Robert


Tomlinson, J.
White, Frank (Bury)
Wrigglesworth, Ian


Tomney, Frank
White, James (Glasgow P)
Young, David (Bolton E)


Torney, Tom
Whitehead, Phillip



Tuck, Raphael
Whitlock, William
TELLERS FOR THE NOES:


Urwin, T. W.
Wigley, Dafydd (Caernarvon)
Mr. Walter Johnson and Mr. Laurie Pavitt.


Varley, Rt Hon Eric G.
Willey, Rt Hon Frederick



Wainwright, Edwin (Dearne V)
Williams, Alan (Swansea)

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 39 (Amendment on Second or Third Reading), and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

BUSINESS OF THE HOUSE

Ordered,
That the motion relating to Ways and Means may be proceeded with at this day's sitting, though opposed, until any hour.—[The Prime Minister.]

SOCIAL SECURITY AMENDMENT [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act of the Present Session to amend the provisions of the Social Security Act 1973 as to the rate or amount of contributions, it is expedient to authorise the payment out of money provided by Parliament of any increase in the sums payable out of money so provided by way of Treasury supplements under subsection (5) of section 1 of the said Act of 1973 where the increase is attributable to provisions of the said Act of the present Session altering such contributions as are mentioned in subsection (2) of that section.—[Dr. Gilbert.]

WAYS AND MEANS

SOCIAL SECURITY AMENDMENT

Resolved,
That, for the purposes of any Act of the present Session to amend the provisions of the Social Security Act 1973 as to the rate or amount of contributions, it is expedient to authorise any increase attributable to the said Act of the present Session in the sums which, under the said Act of 1973, are to be taken as paid towards the cost of the National Health Service in Great Britain.—[Dr. Gilbert.]

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

NEWPORT (ECONOMIC SITUATION)

10.16 p.m.

Mr. Roy Hughes: I welcome this opportunity to raise the important question of development area status for Newport.
I had a similar Adjournment debate on 8th May 1972, and I had no joy on that occasion. At that time we had a Conservative Government. We have found over the years that the Conservative Party has had very little interest in Wales. Indeed, its interest tends to be centred on the south-east of England. Its economic plans led to mass emigration from places like Wales and Scotland which, in turn, brought serious problems to the south-east of England in terms of housing, transport, education and medical services.
The Conservative Government, when returned to power in June 1970, embarked on what I term Common Market strategy They were all too ready to spend many millions of pounds on Maplin and the Channel Tunnel. The continuation of their policies would ultimately have led to government from Brussels.
Throughout their years in office the Conservative Government adopted a parsimonious attitude to Wales, particularly to south-east Wales. For example, there was the issue over the schemes for the expansion for the port of Bristol. Several schemes had been successively rejected by the previous Labour Government on both social and economic grounds, but immediately the Conservative Government came to power in June 1970 Bristol was given the go-ahead. Now that famous city has a £25 million hole in the ground, at double the original cost. My latest information is that not one shipping line has indicated that it is ready to use the new West Dock development.
In comparison, the Labour Party has always recognised the importance of the regional problem and that investment in

the regions is the key. In line with this policy, in 1968, within 24 hours of taking office, the Labour Government overruled the findings of the Hunt Committee and gave intermediate status to Cardiff and Newport. But under the Conservative Government the benefit of that was soon eroded and the Industry Act 1972 extended the intermediate area to north of Birmingham, and there were cuts made in building grants and grants for factory extension.
Newport suffered very badly during those years of Conservative rule. From October 1970 there were no fewer than 3,000 redundancies. British Aluminium closed its factory and decided to concentrate its activities in Scotland. The British Steel Corporation closed the Newport tube works, with a loss of over 1,400 jobs. I have said many times in the House that that works, which had been long established, needed modernising and not closing. It was ideally situated and was a wonderful site, with excellent communications. It would have been an excellent site for the possibilities which seemed to lie ahead in the Celtic Sea. There is now a tube shortage throughout the country.
That is the way in which the BSC seems to carry on. This publicly-owned corporation dealt yet another severe blow to Newport with its decision to concentrate the supply of iron ore at the new ore terminal at Port Talbot. These supplies are for the great Spencer works, employing nearly 10,000 people in Newport. As the supply of iron ore for Ebbw Vale will also cease as a result of the proposal to discontinue steel-making at Ebbw Vale, the outlook for Newport docks is poor.
The logical thing to do in the case of the great Spencer works, seeing that it is one of the most modern plants in Europe, was to build an integrated plant with its own iron ore handling facilities. Instead the British Steel Corporation scrapped the Uskmouth project in Newport for an iron ore terminal after parliamentary permission had been received for it in the late 1960s. Many of the people employed at the works had moved from the valleys of Monmouth-shire and from West Wales. On many occasions they sent delegations of representatives to me, calling for an


integrated plant at Llanwern. But their representations and mine were of no avail.
There's none so blind as they that won't see". 
or, rather, who do not wish to see. Eventually, the BSC will have to return to the principle of an integrated plant at Llanwern.
I know that there is a serious strike at that works at present, and one does not wish to exacerbate the situation, but after all that has gone on our Labour Government cannot allow this great works to be left indefinitely under its present directorship without taking action. I would go so far as to say that fundamental changes are needed in the management and structure of the BSC as a whole.
Bearing in mind, then, all Newport's difficulties, one could not but be shocked by the Government announcement on 14th August this year that Cardiff would be included in the development area, bringing a further expensive development area to Newport's borders and within the industrial complex of the South Wales coast. Why favour Cardiff, which already has capital status?
Admittedly, there is the threat of what could happen at East Moors, but Newport has already experienced 3,000 redundancies and there could be serious difficulties in respect of the docks. The unemployment figures for the two towns in recent months are as follows: April, Cardiff 3·1 per cent., Newport 3·4 per cent.; May, Cardiff 2·7, Newport 2·7; June, Cardiff 2·5, Newport 2·5; July, Cardiff 2·8, Newport 2·5; August, Cardiff 3·3, Newport 3·4. Those irrefutable facts back up my question—why favour Cardiff?
It is difficult to understand this discrimination against Newport, especially when one considers the unemployment figures in other important South Wales towns. According to an oral answer today, in Llanelli the figure is 2·3 per cent. and in Port Talbot 3 per cent., compared with 3·2 per cent. in Newport. The other two towns have been in the development area for many years.
The argument is not confined to Wales. The whole of Scotland is now a development area. Does the Minister suggest

that an oil boom town like Aberdeen, which an Aberdeen Member told me tonight has a virtually non-existent unemployment rate of just over 1 per cent., has greater priority than Newport for development area status? What does Newport have to do to get a square deal? Such treatment in decision making can only breed cynicism about politics and politicians.
Nor would development area status for Newport harm the Monmouth-shire valleys. Newport already employs about 20,000 people from the valleys, who come in to work every day. Only a tiny percentage leave Newport to work in other areas. For the valleys to oppose this status for Newport would be to cut off the hand that feeds them. Alternatively, would they prefer the jobs to go to Cardiff, which would be of no benefit to them?
Even if Newport were to get development area status there would still be a disparity, because only five miles or so up the road there is a special development area. There are those who say "Ah, but Newport has the communications network." In answer to that I would say that this did not prevent two major closures. It is not sufficient for Newport to become some sort of glorified Clapham Junction for industry going elsewhere. In view of its favourable geographical location, it needs to be encouraged.
For some time now there has been the question of a possible major port development there. A number of plans have been put forward—Europort, Uskmouth, the British Transport Docks Board's scheme, and others. Development area status for the town could well be the spark which would get one or other of these schemes under way. Why not encourage Newport? Only a few days ago a report was issued indicating how heavily continental ports are subsidised at present. We should bear in mind, too, that in the late 1960s the flats to the east and west of Newport were earmarked as one of the three outstanding sites for maritime industrial development.
I conclude by saying that there is no case at all for granting development area status to Cardiff over Newport. Members of the Newport Town Council, who have fought hard to bring new industry to the town, are rightly disgusted at present. I hope that tonight the Minister will


announce that this anomaly is to be rectified and that Newport will be included. If not, will be at least give an assurance that this whole archaic system and map of assisted areas will be reviewed to bring a greater degree of fairness into it? Second, will be also give an assurance that his right hon. Friend will be prepared to meet a deputation from Newport, so that our case can be pressed even further?

10.32 p.m.

The Under-Secretary of State for Industry (Mr. Gregor Mackenzie): First, congratulate my hon. Friend the Member for Newport (Mr. Hughes) on securing this very important Adjournment debate tonight, and so early in the Session. To me it was rather reminiscent of our proceedings earlier in the year, when he was one of the first to secure an Adjournment debate on the steel situation at Newport. It shows all of us his genuine concern about his constituency.
My hon. Friend has raised with me tonight a subject which is very close to him—the subject of Newport and, indeed, the future of Newport within Wales as a whole. I am sure that he will accept from me, as a fellow Celt, that much of what he had to say, about developments in the south of England, particularly, found a very ready ear in me. He has been a very persistent and diligent campaigner in favour of the subject that he has raised tonight—development area status for Newport. I do not think that any constituency could have a stronger champion than my hon. Friend in this respect. I am not sure that I shall succeed in convincing him that development area status is unnecessary at this time, but at least I hope to convince him that I have looked very carefully at this situation, and I promise him that I shall continue to keep a very close watch on developments in his constituency.
When we took office earlier this year we inherited a system under which the assisted areas already covered very wide areas of the country and included within them 43 per cent. of all employees in Great Britain, of which the intermediate areas represented about half. There was a very strong presumption against further increases in the coverage of the assisted areas, because the wider the area over which one has to spread the jam, the thinner it will get. But regional incentives do not, on the whole, increase the

total amount of investment carried out in the country—my hon. Friend made that point—though they do have some effect on its location. However, it seemed to a number of us that a very small number of places were not getting the level of help which they needed, where the incentives available in the past had proved inadequate.
We therefore carried out a limited but thorough review into the implications of upgrading these areas. We looked not only at the situation in the places concerned but at the claims of other areas, such as my hon. Friend mentioned, for higher status and at the effects on other areas of making the changes we had in mind. The outcome was the announcement in August, to which my hon. Friend referred, that five places were to be up-graded, including Cardiff, from intermediate to development area level.
My hon. Friend argued forcefully the need for a full-scale review of assisted areas. Although I have some sympathy with that idea in principle, I do not think that this is the appropriate time. We looked at the situation in the summer and decided that large-scale changes in the assisted areas would be premature and damaging to confidence in the stability of regional incentives.
In reaching this decision we took full account of the likely effects on Newport and we looked closely at Newport's own case for development area status. Newport has had the same status as Cardiff in the past and it was often argued that the two places would always have to receive the same treatment. Why, then, my hon. Friend asked, have we drawn the development area boundary between the two? Newport has a slight advantage in location, in that the problem of communications between South Wales and the larger centres of population in the Midlands and South-East England gets easier as one moves east along the coastal belt. I do not claim that this advantage is very significant.
The plain fact is that in the last two and a half years, since unemployment nationally hit its post-war peak and the last changes in assisted areas were made, Cardiff's economy has fared a great deal worse than Newport's. This was borne out in the figures my hen. Friend elicited in reply to a question to the Department of Employment today. Manufacturing


employment in Cardiff has fallen to a very low level as a proportion of the total work force. Unemployment there fell more slowly than elsewhere from the peak levels of early 1972, so that male unemployment in particular is now little below the average for the whole of Wales.
My hon. Friend referred, in passing to the East Moors steelworks. We made it clear at the time—I repeat it now—that the granting of development area status to Cardiff would in no way prejudge the outcome of the current review of the British Steel Corporation's closure proposals; nor does it imply that we expect the review to come out one way rather than another.
Newport presents a much brighter picture, in contrast. The manufacturing sector is strong. Newport's steelworks, the massive Llanwern plant, is expanding and a big investment programme is going ahead. I take my hon. Friend's point about an integrated steelworks at Llanwern, but he will not expect me to comment on it tonight. I will convey his comments to my noble Friend Lord Beswick.
I fully share my hon. Friend's hope that the latest dispute at the Llanwern works will soon be settled on amicable terms and that the new era of cooperation which all concerned hoped would come out of the recent joint inquiry will become a reality.
Unemployment fell sharply from early 1972, and even now, after 10 months in which national unemployment levels have been rising, the number of unemployed in Newport is little more than half what it was two and a half years ago. The unemployment rate now stands at around the average for Great Britain as a whole—significantly below Cardiff's and well below the averages for Wales and for all development areas.
It is true that there are a few places within the development areas in Wales with lower rates of unemployment, but we have to designate assisted areas with a fairly broad brush, since we would otherwise create a patchwork of small areas with different status and cause many more boundary problems and unacceptable distortions in industrial location decisions.
My hon. Friend mentioned my own country of Scotland, referring to Edinburgh and Aberdeen. I am not in a position to argue with him about the figures for Aberdeen, since I do not have them, but I do know of the case of Edinburgh, since it is one that I looked at in the summer. We decided to upgrade it for three reasons: first, its highly anomalous position as a small intermediate area completely surrounded by development areas and some 150 miles from the next nearest intermediate area; second, the fact that some firms had been moving out of the city to gain the benefit of higher incentives; and third, a high rate of male unemployment.
Newport has considerably lower unemployment than Edinburgh and its surrounding areas, and, while it is adjacent to the South Wales development and special development areas, its position is not quite so anomalous as Edinburgh's.
Vacancies are very high by historical standards, and all this is in spite of the heavy loss of jobs which Newport has suffered, to which my hon. Friend has referred. The town has shown remarkable resilience in absorbing these losses. I think this demonstrates that intermediate area status, combined with the town's advantages of location, with its now excellent communications and the energy of its local authority and people, has served Newport exceedingly well.
What I have said so far refers to the past. Turning to the future, the picture still looks favourable. We must acknowledge the danger that unemployment may rise in Newport in the coming months, just as it may rise in the country as a whole, but we know of no major threat to jobs in Newport itself. On the contrary, my Department estimates that there are around 1,000 jobs for men in the pipeline in manufacturing alone.
I quite take the point that the people of Newport are afraid of the effect which the very fact of Cardiff's upgrading to development area status may have on the prospect for their own town, and that these effects have not yet had time to become apparent. I can only say in answer that at the moment Cardiff needs the extra assistance and that in my view Newport is probably strong enough to cope with this new situation. None the less


I give my hon. Friend the assurance he asked for—that we shall be keeping a very close watch on the situation in Newport as it develops in the coming months.
We shall take due account of the points which my hon. Friend has put forward this evening. My right hon. Friend the Secretary of State for Industry has agreed to receive a delegation from Newport Borough Council and we shall listen carefully to what it has to say. I trust that my hon. Friend will be able to take part in that delegation and put his views to my colleague. It is important that we should have some stability in the

boundaries of the assisted areas, but within this constraint we promise that we shall be flexible. If we become convinced of the need for further changes in the boundaries we shall not hesitate to take further action. I am sorry that I cannot go further than that tonight, but I hope that my hon. Friend will accept my assurances and will consider that he has not been wasting his time in raising this important subject on the Adjournment.

Question put and agreed to.

Adjourned accordingly at sixteen minutes to Eleven o'clock.